About Us Why Us? Join Our Free Channel. Join our Free Channel. edgeforex trading market stocks money forex countries usa currency cad canadian vaccine gold traders volatility omicron crypto cryptocurrency bitcoin canadian CAD Today, the Canadian dollar is rising.

It is now ripping higher and is by far the best performing G10 currency. This is a flow-driven move in a thin market; someone need Canadian dollars right away. This is especially true given that oil is down 1. This might be a factor in this move, and it also suggests that CAD liquidity on Monday will be reduced. In general, such moves tend to unravel as markets regain their full vigour. In , the NZDUSD stepped downward in turbulent up and down trading.

The declines occurred despite rate rises by the Reserve Bank of New Zealand in the second part of the year. It is expected that the central bank would want to maintain this trend in Below is the complete Forex Market Summary as of January 13, Source: FXCM, Bluegold Trader website , personal calculations. I will not go through the results of each of the studies, but instead, will illustrate the final ranking. If you want to see the individual results of each of the studies, scroll down to the charts section below.

I have ranked 28 currencies on the scale of Australian dollar, Swiss franc and Danish Krone are not far behind, at The most "underrated" or undervalued currencies are the Turkish lira When looking solely at the major currencies, we see that the Swiss franc and New Zealand dollar stand out among the rest as the most "overvalued" currencies on the basis of all six studies.

Conversely, the Canadian dollar appears to be the most "undervalued" currency among the majors see the chart below. What is important is that the relative overvaluation of the New Zealand dollar is broad-based.

In other words, the results are above zero for all econometric studies plus traders' sentiment analysis. The same is true for the relative undervaluation of the Canadian dollar.

If you are a contrarian investor, you will want to short the most overvalued currency against the most undervalued currency. At this point in time, the most contrarian trades among the major currencies are the following:.

In other words, sell the Swiss franc and the New Zealand dollar and buy Canadian dollar. However, one needs to be careful here because technical analysis must also be taken into account see the very first table above. Over-extension analysis ranks the exchange rates in percentages of their respective trading ranges over the past years and allows us to see how far each currency has deviated from its historical three-year trading range. I choose to look at the three-year period for several reasons.

First of all, it is long enough to capture more than half of a standard business cycle of most economies according to the National Bureau of Economic Research, the average length of a business cycle is about 69 months, or a little less than six years.

At the same time, a three-year range is short enough to be relevant and not to produce too smoothed-out results. In other words, analytical curves maintain some healthy volatility and tend to generate actionable trading signals. The most overextended currency is the Swiss franc. As of this Friday, it was trading at The most lagging currency is the British pound, trading at The oil correlation study simply examines the link between a country's exchange rate and the price of oil.

This relationship is quite critical because oil prices serve as an important proxy for future changes in the Consumer Price Index, which influences countries' macroeconomic policies, which, in turn, affect the exchange rate. Based on the month running oil price standard correlations, I have calculated that the Australian dollar is overvalued by Assessing the strength of any given currency is quite tricky.

Because we usually measure the performance of one currency against the other, the result is always biased. A less-biased approach would be to compare a currency's performance against some kind of neutral asset, such as gold. Analysts call it a secular performance analysis. Secular performance is a useful, but underused concept in forex trading. It is an important measure because gold it is assumed has some intrinsic value as opposed to fiat currency, which is just a "legal tender" not backed by any physical commodity.

In the end, the price of gold will be determined by supply and demand rather than by central banks' monetary policy and the printing press. Analyzing currency performance against that of gold allows us to see the scale of "real" demand for this or that currency. Based on the month running secular performance observations, I have calculated that the Australian dollar is overvalued by As a general rule, economic data should always justify the moves in currencies' exchange rates.

However, it is difficult if not downright useless to cherry-pick a single economic indicator and compare it to a currency's performance, because the relative importance of any given economic indicator will vary depending on the economy in question. For example, trade balance data can influence the exchange rate of commodity exporters, such as Australia and New Zealand, but it is less relevant for the United States, whose dollar is a global "safe haven" at least for now. Stock Performance in January Foreshadow the Rest of the Year?

Does the U. Dollar Tend to Rise in January? Is the Calendar Year for the U. Dollar Driven by January Performance? Adam Lemon. on January 05, Updated on June 24, A supposed tendency of stock markets to rise during the month of January.

If this were true, it would mean there would be an edge in buying stocks at the beginning of the month and selling at the end of January. A supposed tendency of the yearly price change of stock markets to follow the January price change. If this were true, it would mean there would be an edge in waiting until the END of January, and buying stocks if prices had risen during January, or alternatively selling if prices had fallen over the month.

Trades would be exited at the end of the year. Extrapolating from a belief that either or both of these assumptions are correct, it could then be said that the U. stock market affects the U. This question should actually be rephrased slightly in order to make it more accurate. The real question is not whether stocks tend to rise in January — the U. stock market has a clear long bias , meaning that any month is on average a rising month.

The question is, therefore, not whether stocks tend to rise in January, but whether stocks generally rise in January more than they do in other months.

However if we take every single month during this 65 year period, we find that the average month has seen a rise in the Index of only 0.

Stocks Tend to Rise in January? Does U. Stock Performance in January Foreshadow the Rest of the Year? Does the U. Dollar Tend to Rise in January? Is the Calendar Year for the U. Dollar Driven by January Performance? Adam Lemon. on January 05, Updated on June 24, A supposed tendency of stock markets to rise during the month of January. If this were true, it would mean there would be an edge in buying stocks at the beginning of the month and selling at the end of January.

A supposed tendency of the yearly price change of stock markets to follow the January price change. If this were true, it would mean there would be an edge in waiting until the END of January, and buying stocks if prices had risen during January, or alternatively selling if prices had fallen over the month. Trades would be exited at the end of the year. Extrapolating from a belief that either or both of these assumptions are correct, it could then be said that the U.

stock market affects the U. This question should actually be rephrased slightly in order to make it more accurate. The real question is not whether stocks tend to rise in January — the U.

stock market has a clear long bias , meaning that any month is on average a rising month. The question is, therefore, not whether stocks tend to rise in January, but whether stocks generally rise in January more than they do in other months. However if we take every single month during this 65 year period, we find that the average month has seen a rise in the Index of only 0.

This shows clearly that since , stocks have tended to rise almost three times more in January than they do in any given month. The next question is whether what happens in January to the stock market is predictive of what will happen during the rest of the calendar year. We can look at this clearly by using Excel to calculate the correlation coefficient between the performances of the Index over the month of January as compared to its performance over the next 11 months.

There is indeed a positive correlation coefficient of 0. However we could ask whether this is the same for any month, i. what is the correlation between the performance of any given month and the performance over the subsequent 11 months? The answer is that sampling every month gives a correlation coefficient of only 0. However it should be noted that of the 26 negative Januarys included in the sample, only 11 presaged a negative year, so the effect is greater on the long side.

We can test this by examining what happened to the U. Dollar Index during historical Januarys. For convenience, I used historical data published by the U. Federal Reserve showing the Broad Nominal Index from to date. Looking at these 42 January months, the average month produced a positive change in the Index of 0. This suggests that the U. Again, all that we need to do is calculate the correlation coefficient of the January performances with the performances for the remainder of that calendar year.

There is a positive correlation coefficient of 0. If we compare the result for the subsequent 11 months correlation to every month within the sample — not only Januarys — we get a correlation coefficient of 0. stocks and the U. However what really stands out is that both the U.

stock market and the U. dollar have shown clear tendencies to rise during the month of January. Adam Lemon began his role at DailyForex in when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account.

He has previously worked within financial markets over a year period, including 6 years with Merrill Lynch. Learn more from Adam in his free lessons at FX Academy.

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GOLDEN CROSS - The golden cross is a candlestick pattern that is a bullish signal in which a relatively short-term moving average crosses above a long-term moving average. If this were true, it would mean there would be an edge in buying stocks at the beginning of the month and selling at the end of January. Trades would be exited at the end of the year. Is the Calendar Year for the U. However it should be noted that of the 26 negative Januarys included in the sample, only 11 presaged a negative year, so the effect is greater on the long side. Therefore, the outlook remains positive, but uncertain.

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