A quick look at ranking the Forex ETF’s (Exchange Traded Funds).

The 2e line from the top is the Australian Dollar  while the Yen is at the bottom.

This matrix is showing the ranking and a green figure means not buying the ETF, but it’s the strongest in the selected group of ETF’s, while red is the weakest in the group. Each colomn is a week.

Click on the matrix to get a better view.

The next step is to measure real market value. 

The GBP has a green column which indicate an uptrend for the last 39 trading days, but more important it’s 2.3% up in the last 3-months while the Yen is trending down, also for the last 39 trading days, the weakets in the group and down 7.9% in the last 3-months.

So finally we look at the Yen chart and we see at the top the trend indicator in red,  down for the last 39 trading days and ROC steady down as well.

We only can rank, at the moment, the currency ETF’s but we try to show you also later the all the spot currency pairs as traded by most brokers.

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.

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.

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.

I like to come back on earlier 3-Way Arbitrage possibilties to trade the present volatile markets with less risk compared to trade just a signal currency pair.

Earlier post about this subject are on:  http://blogs.fxstreet.com/forexhedge/2009/02/05/arbitrage-2/

On Febr. 20th. the Balance indicator, at the bottom of the chart below,  closed below the zero line indicating to sell EUR/CHF 1.4763 and buy  both. EUR/USD at 1.2535 and USD/CHF at 1.1781 to bring back the three in a balanced position again.

Near last Fridays’s close the open position was still at EUR/USD 1.2830, USD/CHF 1.1555 and EUR/CHF at 1.4835 which is + 297 pips an EUR/USD, minus Swiss 226 pips on USD/CHF and minus 72 Swiss pips on EUR/CHF, or all together in USD near US Dollar pips 600 per 1 lot each on the above currency pairs.

Not much maybe, but still money and reduced risk.

What can we learn from this strategy ? Using three currencies,  which are normally in balance with each other, will reduce risk, have higher cost and use more margin.

Due to a holiday break I can only answer questions after March 28th.

There are many way’s to rank strength and weakness of the currecy pairs.

Below the ranking of the currecy ETF’s as we did in earlier posts.

Currency ETF’s traded on US exchanges are quoted in US Dollar, so different from trading spot markets.

In this ranking I am looking in the right column to the 3-month ROC, so we see the Yen 8% up and the Mexican Peso 11.3%  down in the last 3-months.

The column with the colors are the weekly trends while the next column tells me how many days that trend is running plus the percentage change of the weekly trend. 

Most currency traders however are trading the spot markets and like to have a quick view as well what is strong and what is weak on daily or intraday basis.

Of course there are many ways, but a simple way of doing this is by comparing the RSI of the major currencies and show them on top of each other.

The purple line at with RSI 64 is the USD/JPY and the green line 61 is the GBP/USD turning down.

At the bottom we see the EUR/GBP with a very weak RSI.

These are not trading signals but gives a first indication were the currencies are so you can do a next step in your analyses.

On earlier posts we looked to ranking of the Currency ETF’s (Exchange Traded Funds) as an alternative for trading currencies for hedging or speculation.

The ETF’s are traded like stocks and most are quoted in US Dollars.

The chart below is the comparison chart for the major currency ETF’s and it’s simple to see that the Yen/USD (Yellow line) is at a different level compared with the other major currency ETF’s.

Zoom in on the chart to see the percent change in value. during the last 6 months.

Easy ranking can be done on:

http://etfscreen.com/cchart.php?sl=212&cl=FXA+FXE+FXF+FXY+FXM+FXC+FXB

On the tabel below we are looking to the ranking of the Currency ETF’s (Exchange Traded Funds).

Each column is a week and 99 (green) means it’s the strongest in the selected basket while 10 (red) is the weakest in the basket of selected currency ETF’s.

So 99 means not a buy signal and 10 means not a sell signal but you see the ranking per week (column) and also all ETF’s are quoted in US Dollar while in Spot trading some currencies are quoted in their home currency.

In the next table we see the real strength/weaknest picture, with on top the Yen ETF with a closing price of $ 112.13  and a daily change of minus 17 cents while the weekly trend (green) was up for the last 18 trading days with a weekly trend change of  1.9% and a 3-month change of 9.1%.

On the weak side we see Pound Sterling with a last close of 138.07 which is -0.85 daily change and it’s weekly trend is down, but more important it’s long-term 3-month change is -14.6% !!  (What a dive).

Checking out that weak Pound Sterling on a weekly chart below, another important indication is the weekly RSI which is below 50 since December 2007  and even more since August 2008 !

RSI below 50 means there is more dowward pressure then upward pressure on a weekly basis.

Long term investors like to see at least the weekly RSI above 50 before thinking about long positions.

In my earlier post of December 21,  I got into basic Currency ETF’s (Exchange Traded Funds). http://blogs.fxstreet.com/forexhedge/2008/12/21/currency-etfs/

There are different way’s to trade Forex, like Futures and now ETF’s which are mainly traded on US exchanges and quoted in US Dollars.

In the table below we do a first step in ranking the strongest/weakest currency shares and we see the JPY as the strongest (green) and the GBP (red) as the weakest.

The figure 99 for the JPY means not a buy signal but simply the strongest in the basket in the table below, while the weakest, the GBP in red (13) is not a sell signal but the weeakest in the basket.

Each column in the table below is a week and it’s good to see how long they are already the strongest/weakest.  

The second step is to look at the next table below.

The green column is the weekly trend indicator which is for the JPY already 67 day’s green and the three month change is now at 13.6%, so very strong already for a long time, while the opposite is for the GBP with a red weekly downtrend already for 106 days and a three month change of 17.9%.

Of course this approach is different, trading currency shares instead of Spot Forex, but not all traders have the same objective for trading Forex, think about hedging corporate Forex risk.