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Relative currency strengths

  • #1
  • First Post: May 9, 2006 9:00pm May 9, 2006 9:00pm
I've been confused lately about why this anti-dollar trend just won't go away. I believe I've found the one true answer.

I started using "spread trading" techniques to dig into the relationships among the various currencies. I found a very suprising result: GBPUSD + USDCHF has ben trending more strongly than GBPCHF, even though USDCHF has been tanking the whole time.

This tells me that the people who are long on GBPUSD are just dollar bears and trend-followers who don't even look at the crosses. They should be long on EUR, not GBP.

When GBP crashes and EUR does not (though I'm sure the Euro will suffer too), I hope this will be the end of dollar-centrism. This will make the game more fun for all.
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  • #2
  • May 9, 2006 9:09pm May 9, 2006 9:09pm
So if your analysis is correct here. When the reversal starts. You are thinking the GBPUSD is going to take a dive? Have I got that right?

BTW what is the comparison indicator you are using here? It looks like a correlation comparison... Thanks scott


Quoting Mike Jolley
I've been confused lately about why this anti-dollar trend just won't go away. I believe I've found the one true answer.

I started using "spread trading" techniques to dig into the relationships among the various currencies. I found a very suprising result: GBPUSD + USDCHF has ben trending more strongly than GBPCHF, even though USDCHF has been tanking the whole time.

This tells me that the people who are long on GBPUSD are just dollar bears and trend-followers who don't even look at the crosses. They should be long on EUR, not GBP.

When GBP crashes and EUR does not (though I'm sure the Euro will suffer too), I hope this will be the end of dollar-centrism. This will make the game more fun for all.
  • #3
  • May 9, 2006 9:24pm May 9, 2006 9:24pm
GBP is so massively overbought that it will have to tank bigtime. I hope this doesn't affect other dollar pairs. GBP is the main reason why prices are so far out of whack.

I wrote the indicator to just do a straight addition or subtraction. I'm not sure how to fully use it yet, but relative trend strength is a pretty obvious use.

I was trying to short GBPCHF and lost. I couldn't figure out why GBP is stronger than CHF. I think the only reason is that speculators like GBP's volatility and they're just riding the trend. I think people are starting to understand and we'll see a change. If you want a realistic version of the value of GBP, look at GBPJPY.
  • #4
  • May 10, 2006 9:10am May 10, 2006 9:10am
Quoting Mike Jolley
GBP is so massively overbought that it will have to tank bigtime. I hope this doesn't affect other dollar pairs. GBP is the main reason why prices are so far out of whack.

I wrote the indicator to just do a straight addition or subtraction. I'm not sure how to fully use it yet, but relative trend strength is a pretty obvious use.

I was trying to short GBPCHF and lost. I couldn't figure out why GBP is stronger than CHF. I think the only reason is that speculators like GBP's volatility and they're just riding the trend. I think people are starting to understand and we'll see a change. If you want a realistic version of the value of GBP, look at GBPJPY.
See, that's the funny thing about indicators...sometimes, they just don't paint an accurate picture.

The market will do what the market will do and unfortunately do, it will do it in it's own way.

While I agree that we are within a few days/weeks of a correction, the underlying fundamentals for the USD just aren't quite there to offer a "pop" in the opposite direction. Of course, any announcement today could change that opinion. Right now the prevailing THOUGHT trend (if you read the price and news etc) is that while we expect some sort of a pullback soon, the dollar will inevitably continue to slide. However, a longterm change in direction will only occur once these THOUGHT trends dissappate. However, just open any news source or any currency options chart or any chart for that matter, and you will see that we are clearly in a USD bear market and that the reversal of that market stance will only be changed once the underlying fundamentals start changing it.

At least that's what I gather. For me, the only reason to be a dollar bull now is to 1) hope for a slight correction to profit on or 2) you are currenctly in a dollar long position now (perhaps a carry trade that went south).
  • #5
  • May 10, 2006 9:36am May 10, 2006 9:36am
Isn't correcting the market kind of our job as traders? Won't traders that serve to correct the market win in the long run?
  • #6
  • May 10, 2006 9:57am May 10, 2006 9:57am
Quoting Mike Jolley
Isn't correcting the market kind of our job as traders? Won't traders that serve to correct the market win in the long run?
If they can survive a losing position long enough, i suppose that would be true.
  • #7
  • Last Post: May 10, 2006 10:32am May 10, 2006 10:32am
Quoting Mike Jolley
Isn't correcting the market kind of our job as traders? Won't traders that serve to correct the market win in the long run?
Mike,

I really doubt that traders of our means have any hopes of moving the market. Instead, I believe that we as "fleas". should ride the backs of the big money behemoths as they lumber along in any direction that they will. Sometimes they will follow the technical trading bible, somtimes they won't. It all depends on which makes them the most money.

Sincerely,

Alan
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