Every day watching EUR/USD or GBP/USD, traders blur their vision and stop seeing the global picture of what is happening in the currency market. We are launching a new column, and once a month we will give you a chance to look at the foreign exchange market with fresh eyes.
Forex chart of the day
What is this chart? It shows the major currencies traded by our traders. The reference date is GMT 00.00hrs on the 1st of January 2021. From this date, you will see how each currency has risen or fallen in relation to a basket of currencies during the month of January.
Green is a dollar
Red – pound sterling
Yellow – EURO
White – Japanese Yen
Blue – Swiss franc
Brown – Canadian dollar
Orange – Australian dollar
Blue – New Zealand dollar
What do we see on the graph?
• Pound Sterling (red line) led the growth in January against all other currencies
• The Japanese yen (white line) has become the main outsider
• The US dollar (green line), despite the expected collapse, is also rising steadily, second only to the British pound.
• The euro (yellow line) collapsed strongly by mid-month, then began to rise
Is there a practical application for this graph?
Of course! If we are entering a medium-term trade, we should always understand what is happening to a particular currency pair globally. For example, on the pair Pound/Yen, we could only go long, but not short. It is obvious that these currencies diverge in different directions. They are moving against a basket of currencies, thus eliminating errors.
Another practical application. We are used to trading the euro/dollar pair and want to open a position betting on a rising dollar. Looking at the chart above, it makes sense to open a position on the USD/JPY pair. The Japanese currency is falling faster than the EUR, which means that the trend in this pair is stronger.
08.00 German retail sales for December
10.00 EU manufacturing activity index for January
10.30 UK Manufacturing Activity Index for January
16.00 ISM Manufacturing Activity Index for January in the USA
Important Notes on This Publication:
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.