As we know, increased or decreased risk appetite, reflected in the Carry Trade, can significantly influence the price of certain currencies, sometimes this price variation can be more pronounced in some currencies than others.
In this article we will present a technical analysis tool called Performance Relative, to help us identify which currencies offer the best performance, and which are more susceptible to Carry Trade, allowing in this way, choose the pair with the best performance for our operations.
To fix our comparative chart of exchange, we use an indicator called the ROC (Rate of Change), which points us in percentage terms, the difference between current price and the price n-periods ago.
The formula for the below is
ROC = [(Price - price n-periods ago) / price n-periods ago] * 100
The ROC is an oscillator that varies around zero, when the price rises, the ROC is positive when the price falls, the ROC is not, always showing the percentage change in the currency, with respect to a given previous period.
This indicator can be used alone, identifying positive and negative divergences, the zero line crossovers and zones Purchase or sale. However, this indicator gives many false signals, so it is recommended to use another indicator to confirm these signals.
The S and P 500, is the index most commonly used to measure investors' appetite for risk, when the world economy is is in with positive signs, investors tend to buy shares of stock and coins that can offer high returns investment therefore the index will tend to rise, the opposite happens when the economy shows signs of weakening, then the risk exposure decreases, and the index will tend to decline.
The following chart Relative Performance using the ROC, we can observe the movement of S & P500, represented by EPU9 future, and the evolution of various currencies against the movement of that index.
Notice how the EURUSD and AUDUSD, are correlated with movements in the S & P500, while the USDJPY and GBPUSD, do not maintain the same correlation, this analysis indicates that for that time frame, the best pairs that reflect the overall feeling and more indicated to invest, would be the Euro and the Australian Dollar
In this article we will present a technical analysis tool called Performance Relative, to help us identify which currencies offer the best performance, and which are more susceptible to Carry Trade, allowing in this way, choose the pair with the best performance for our operations.
To fix our comparative chart of exchange, we use an indicator called the ROC (Rate of Change), which points us in percentage terms, the difference between current price and the price n-periods ago.
The formula for the below is
ROC = [(Price - price n-periods ago) / price n-periods ago] * 100
The ROC is an oscillator that varies around zero, when the price rises, the ROC is positive when the price falls, the ROC is not, always showing the percentage change in the currency, with respect to a given previous period.
This indicator can be used alone, identifying positive and negative divergences, the zero line crossovers and zones Purchase or sale. However, this indicator gives many false signals, so it is recommended to use another indicator to confirm these signals.The S and P 500, is the index most commonly used to measure investors' appetite for risk, when the world economy is is in with positive signs, investors tend to buy shares of stock and coins that can offer high returns investment therefore the index will tend to rise, the opposite happens when the economy shows signs of weakening, then the risk exposure decreases, and the index will tend to decline.
The following chart Relative Performance using the ROC, we can observe the movement of S & P500, represented by EPU9 future, and the evolution of various currencies against the movement of that index.
Notice how the EURUSD and AUDUSD, are correlated with movements in the S & P500, while the USDJPY and GBPUSD, do not maintain the same correlation, this analysis indicates that for that time frame, the best pairs that reflect the overall feeling and more indicated to invest, would be the Euro and the Australian Dollar
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