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Buy the Dollar? Is the euro still in an underlying bull market against the dollar? And against the yen? CB has been arguing that the euro was due for a significant correction. The issue now is whether the euro has entered a new bear phase. Currency fluctuations are the biggest wealth hazard of all for international investors and businesses. We cannot avoid them. But can we exploit them for systematic profit? Yes we can: But let's explode two myths. |
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Myth 1): the currency markets are highly sophisticated. WRONG! In their present form, they are a baby market, born only in 1973. There are surprisingly few full-time experts, aside from the dealers in banks and brokerages. There you'll find expertise - but it doesn't count since their time horizon is seldom longer than a day - often more like 5 minutes! By comparison, stock and bond markets are highly sophisticated, with thousands of savvy participants and centuries of inherited wisdom. Myth 2): the currency markets are very complex. The trade outlook points this way, inflation that way, interest rates hither and intervention thither. WRONG! Observers are so preoccupied with these things that they tend to be already discounted in current prices. And they're not necessarily the factors that move the currencies anyway. They are usually just noise. In truth, there is normally just one story behind the underlying trend in a currency. And all other movements are corrections of excesses in the trend. The key to almost all these movements is sentiment. The currencies are in fact quite simple, because there are few critical factors: the trick is in knowing which they are. Which is the noise and which is the true signal? That's what anticipating market movement is about. Over the years, Currency Bulletin has developed a systematic approach, applicable to all market conditions. |
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