I was not able to upload a story last week due to a trip to the USA, so the first thing I do when I came back in the office is to compare the strength and weakness of the currencies pairs I normally follow.

The top purple line, the NZDUSD, was 60 pips weaker last week while the black line at the bottom, the USDCAD, was up sharply almost 300 pips.

From here on I go to a closer analyses for each of the currency pairs.

The real followers of this blog must remember the story “EURUSD to the Moon” !

The situation has changed today in a sell signal again as you can see below.

The bars went green 2 weeks ago at 1.2840 and now short again at 200 pips lower and if we stay there today the signal is official short because it’s the 1e close below the previous weekly low.

On March 3th. (see earlier post) I wrote about comparing the RSI’s of  a number of currency rates in order to see quickly how strong or weak they are.

On March 3th. (see earlier post) the lowest RSI value was 25 for the NZD/USD at 0.4932 and last Friday the RSI level was 82 at 0.5581 while the USD/JPY on March 3th was RSI 80 at 97.50 and last Friday the RSI level was 43 with 95.95.

Not all currency rates goes so nicely but it’s a good first step analyses when overlooking a number of currency rates in a basket in order to control trading risk.

In general, the RSI > 50 means more upward power than downward power and v.v. if RSI < 50

You can check this link: http://www.2hedge.com/mmfxhedge.html  if you like to have a look on the four major currencies with their average hedge level percentages (bottom pane).

This is the percentage to hedge to reduce corporate currency risk and a hold an average exchange rate for paying or receiving foreign currencies.

I can’t remember, during my 25 years of trading, a move like tonight of 425 pips in the EUR/USD !

In earlier posts I mentioned the TrendFinder strategy, showing weekly (boxes) and daily bars.

The bar get’s red when the daily close is below the previous weekly low and the daily bar gets green when the close is above the previous weekly high.

The EUR/USD went green a week ago at 1.2840 while  we are flying around 1.3480 at the moment of writing this post.

The Swiss France is still in a nice uptrend and holding that trend since the beginning of the year after the big move last week.

The strategy is simply and logic as explained in earlier posts.

The chart below is based on EU trading hours with a close at 10 PM CET (Wall Street close).

We buy near the close once the close is highter than the previous weekly high and only change that signal once we get a close below the previous weekly low.

For this week the next signal is a long way and we only change the trend to short once we get a close below the previous weekly low, which is at 1.1485

Of course we add some strategy in sideways markets but it is clear that to much leverage is a killer in this strategy, while simply logic, holding several currencies in a basket with low leverage, look a strong long term strategy.

This strategy is not only for currency trading but works well in other markets as well.

Obama administration unveiled it’s $ 3.6 trillion budget for next year.

A trillion is more than just a 1 followed by 12 zeros !

It’s a thousend billion  . . . .  a million millions  . . .  and it’s BIG !

For a look at what $ 1 trillion Dollars looks like.

We start we a $ 100 dollar biljet.

A packet of $ 100 bills is less than 1/2 “thick and contains $ 10,000

The next little pile is $ 1 million dollars (100 packets of $ 10.000).

While a measly $ 1 million looked a little unimpressive, $ 100 million is a little more respectable and it fits neatly on a standard pallet . . .

And $ 1 BILLION dollars  . . . . now we are really getting somewhere   . . . . 

Next we look at ONE TRILLION dollars, it’s a million million. It’s a thousend billion.

It’s a 1 followed by 12 zeros.

In earlier posts we looked into ranking Currency ETF’s (Exchange Traded Funds) as spot rates are not yet aviable to this ranking option yet.

A first ranking we see the Swiss France ETF at the top, so quoted un USD, and it’s strong the last 4 weeks while the Swedish Krona and Mexican Peso, at the bottom,  got even weaker and weaker.

This first ranking means the strongest/weakest in the group of selected Currency ETF compared to each other and not the real market strength/weakness.

In a second ranking we see what’s real strong/weak.

The Swiss Franc ETF FXF has still a down trend, but it changed positive 1.1% last week (2e column from the right) and it’s 3 month momentum changed positive 5.4%.

The column in red/green is a long-term trend indicator only.

It’s clear that this approach is only a first step in ranking strength/weakness which can be done with RSI’s as well as I wrote in earlier posts (RSI’s of all currencies on top of each other).

Of course it’s a little different thinking as most ETF are quoted in USD, so the Swiss quote must be opposite in spot currency trading. On top the trend indicator and RSI at the bottom.

Have a look at Long-Term Charts on the website of my good friend Steve Moore.

Not only Currency charts, but also Commodities, Indexes etc.

http://www.mrci.com/pdf/

Further,  end-of-day prices are available, incl. Currency Futures:

http://www.mrci.com/ohlc/ohlc-all.php

A very good source for daily data and information.

Not all of us are speculators but maybe have to hedge your corporate currency risk for import or export reasons in order to protect the goods sold/bought.

The EUR/USD hedge indicator at the bottom pane was below the zero line since January 19th. so from that date on it was short on the percentage given by the indicator.

For the last five weeks this percentage was steady 100% short.

You will find the major currencies on our website  http://www.2hedge.com/mmfxhedge.html  updated during the weekends.

How strong are the major currencies compared to each other since last month?

A quick look is to put each RSI on top of each other to get a first impression.

On top (purple line, value 82)  we see the the USD/JPY steady climbing while at the bottom (light purple line, value 25) is the NZD/USD remaining weak.

The light blue line is the AUD/USD at 41 while the USD/CAD in black at 72.

Brown at 58 is the USD/CHF and EUR/USD, red at 39 close the GBP/USD at 37 in green.

This is an easy way to get a first impression how they move in strength/weakness over the last month.

On the RSI above the 50 level means more upward pressure than downward pressure while the opposite for RSI levels below 50. 

Before trading, you need a closer look of course on each currency pair.

After a week away for a real holiday it’s always a interesting to see the developments of the major currency and stock markets again.

Not only in currencies but also the major stock markets and Barrons had a interesting article how the markets developed after Obama started in office a month ago, now around actually 12% down !

They are still waiting for a change.

On the next post we will be back on currencies again.