International Chart Watch

Revision Date: March 1996

 

SHORT-TERM FOREIGN EXCHANGE RATE TIMING MODELS

For healthy profits in the currency markets, it is essential to identify the short-term turning points and to get in line with the new trends as they get underway.

Of course, identifying the trend and getting in early on is far easier said than done. The prevailing trend may get lost in a long neutral trading range before resuming, or the trading range may itself be part of the reversing process. An approach based solely on subjective chart reading can be hazardous. We've found that the most reliable and risk-averse approach is one that is based on objectively-determined timing models that provide the bottom-line message of numerous technical indicators designed to generate buy and sell signals over a diversity of time frames. In charts #I200, I300, I400, I500, I600, I700, I800, I900, I1000, I1100 and I1400 (0 series of our country specific charts) we feature our short-term timing models for nine major currencies and the Federal Reserve Board U.S. dollar index.

For the purpose of catching the short-term swings, our currency models generate about 11 to 15 trades per year on average The differing number of signals produced by each model reflects the differing make-up of each model, as a currency model will rarely contain an indicator with the exact same formula as an indicator in another model. But all of our models contain the same types of technically-based indicators, which fall into three general categories. 1) Moving average cross-overs. Buy signals are generated when the data crosses above the moving average or does so by a specified percentage and sell signals are generated when the data crosses below the moving average or does so by a specified percentage. The moving averages can be simple moving averages or exponential and front-weighted moving averages, which give more weight to the more recent data. 2) Moving average and momentum slopes. Buy signals are flashed when the data or its moving average reverses upward or does so by a specified percentage and sell signals are flashed when the data or its moving average reverses downward or does so by a specified percentage. The change needed for a buy or a sell is usually the same for the buy signals as it is for the sell signals. Slopes are also used with momentum (the data's moving rate of price change), with buy signals generated by upward reversals and sell signals generated by downward reversals. Many indicators use the moving average of a momentum for generating signals. 3) Relative strength and deviation from trend indicators, which measure the volatility and cyclical shifts of exchange rates over different periods of time.

The bottom clip of each chart features the timing model which has been scaled from 0 to 100, allowing for easy comparisons where a 0% reading means that all of the indicators in the composite model are negative and a reading of 100% mean that all of the indicators are positive. As shown by the track records, it pays to follow the technical message provided by each of these timing models.

 

I500                  06/19/2025  06/18/2025  06/17/2025  06/16/2025  06/13/2025
====================  ==========  ==========  ==========  ==========  ==========
Canadian Dollar           73.020      73.020      73.100      73.680      73.620
CAD ST Currency Mode      30.000      30.000      70.000      70.000      70.000