Forex RouteMap: Chart Library

The investment strategies used to forecast foreign currencies in our Research Universe

 

Foreign exchange rates may be shown as price only or as total returns including dividends. Where appropriate charts use the set of P/T Real Effective Exchange Rate Indexes as the basis for analysis. See a sample chart for each investing strategy used in the Forex RouteMap, including the complete simulated record of signals, where appropriate. Check out long-term performance simulation for market timing strategies

 

Momentum & Value Summary:- This chart is designed to summarise the key action-orientated features of other foreign currency analysis charts, omitting explanations for those who just want to see the bottom line. It incorporates both momentum Buy & Sell signals as well as a proprietary econometric forecasting model created by PIT. For more detailed analysis, see Momentum, Spare Capacity and Valuation charts.

 

Stock Market Performance:- This chart is intended to predict exchange rate movements based on stock market performance because that has become the key factor in the international flow of funds. This strategy shows how chart technical buy and sell signals for the relevant stock market can also have predictive value for that country's exchange rate. See Chart Technical Analysis in the Shares RouteMap.
  Investment Sentiment: - Nobody gets it always right and nobody gets it always wrong, but there is a tendency for some kinds of investor to out-perform well and others to under-perform. This strategy combines as many such indicators for each market as possible whose track record over the past decade has been proved to be effective. While individual indicators may be erratic, these composite indicators can be excellent predictors of year ahead performance.

 

Chart Technical Analysis:- Based on the idea that the trend is your friend, this chart generates Buy & Sell signals using technical analysis. Thus signals depend only on price information available at the time. It relies on analysis of rates of change as well as moving averages. This chart is based on the observation that the psychological effect of a shock takes about a year to wear off, and is based on the Coppock Curve, together with moving average and divergence analysis.

 

Real Effective Exchange Rate:- This chart indicates whether foreign currencies represent good or bad value at current exchange rates. It is designed to highlight exchange rate cycles that are ultimately self-correcting owing to lagged effects of the balance of payments on real effective exchange rates, that is to say the trade-weighted exchange rate adjusted for comparative inflation rates. Best Guesses are "what-if" projections assuming constant exchange rates.
  Balance of Payments:- This is a "what-if" chart that is intended to highlight foreign exchange rate cycles that are ultimately self-correcting owing to lagged effects on the balance of payments. It is designed to show the risk to the exchange rate based on the payments deficit on Current Account, including a Best Guess as to future developments. Generally, this is a lagging indicator. For consistency, the current account is shown as a proportion of GDP.

 

GDP Output Gap:- This chart looks at the historical relationship and likely future development of a variable closely correlated with exchange rate movements - namely differences in the pressure of demand between economies, as expressed in the amount of spare capacity. Best Guesses show what would happen to the difference in the pressure of demand based on forecasts for spare capacity, both at home and abroad.

 

Interest Rate & Bond Yield:- This chart indicates the historical relationship and generally expected future development of the two variables most closely correlated with exchange rate movements - namely the premium or discount of real domestic interest rates and bond yields over international levels. Where available, rates at both short three-month and long ten-year ends of the yield curve are shown.
  Seasonal Trading Patterns:- This chart is designed to exploit short-term trading patterns, and is intended for traders, arbitrage plays over time and to assist long-term investors in fine-tuning entry and exit points. It uses end-month data to illustrate seasonal trading patterns. The chart shows the cumulative performance through the year, based on short, medium and long-term historical records.

 

Chronology of Events:- This high magnification chart is designed to study the significance of past events  - economic, political, international or market-specific. As this chart is much larger than the screen, scroll bars enable the user to locate any point over the past quarter century to examine market action before and after the chosen event. To enhance magnification, the financial history is divided into earlier and later periods. Comparable charts are available for selecting Asset Classes in general and for Stock Markets, Investing Styles, Government Bonds in particular.

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Exchange Rate Charts are part of the free international investment seminar. Just follow the classroom signs alongside, either now or come back here later when you have looked at whichever chart types in this section of the library interest you. At the end of each class, there is a sign to the beginning of the next class.