A month ago we started a new column. We look at the correlation of the major forex currencies against each other at the end of the month. Today is the last day of February and you can see what has changed during the month.
What is this chart? It shows the major currencies traded by our traders. The reference date is 00.00 GMT on the 1st of January 2021. From this date, you may follow the rise or fall of each currency against a basket of currencies during the first two months of the year. The red line in the centre of the chart is 00.00 GMT on the 1st of February. That is, this line allows to visually separate January data from February data.
Green – dollar
Red – GBP
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?
• A trend that started in January is usually very hard to stop
• Above we see a clear confirmation of this rule. The strongest currency in January (Pound Sterling) continued to rise against other currencies
• And the weakest currency in January (Japanese yen) also remained the weakest in February
If we get into a medium term trade, we should always understand what is happening with a particular currency pair globally. For example, at the end of January, if we like to trade on the trend, the best solution was to open a long position in the Pound/Yen pair.
The January monthly candlestick closed at 143.5 Yen per 1 Pound. On the last day of February the pair traded at 150 yen per £1. The monthly increase was approximately 4.5%, which is a lot by forex market standards.
What else do we see useful on this graph?
• Strong growth in commodity currencies: Canadian, Australian, New Zealand dollars. Of course, the optimism here is related to the pandemic ending soon. This means that the demand and price for raw materials is rising
• Of particular note is the sharp fall in the Swiss franc. This could be an indication that smart money is not waiting for a collapse in world stock markets. As the franc is considered an asset asylum. Amid daily speculation that the stock market bubble is about to burst, the franc should be appreciating instead of cheapening.
09.00 Switzerland’s Q4 annual GDP data
14.30 US Personal Spending in January
14.30 Chicago PMI for February in the US
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