Trading

In recent months, the credit crunch has ignited a global trend towards risk aversion.  As a result, a correlation has developed between equities, which serve as a proxy for risk, and certain currencies.  The Forex Blog previously covered the link between the S&P 500 and the Japanese Yen, whereby the Japanese Yen moved inversely with the S&P as a decline in  risk appetite led carry traders to unwind their positions.

Through its trademark iPATH line of funds, Barclays Bank recently introduced a new ETN designed to mimic the carry trade.  In accordance with this strategy, this note is linked to  the performance of the Barclays Intelligent Carry Index, which aims sell low-yielding currencies and use the proceeds to invest in those that offer higher yields.  This index holds varying combinations of the so-called G10 currencies, which includes all of the majors as well as the Norwegian Krona and Swedish Krona.  Traditionally, carry traders have sold one specific currency (i.e.

Yesterday, the Forex Blog featured a story that explained how to make money when volatility is low.  The consensus of the article is that investors must shift their strategy from trading to trending, which requires an adjustment in outlook from short-term to long-term.  But given that volatility is low and that currencies often move laterally against each other, how do you know which direction to bet on, and accordingly, when to buy or sell?  The answer requires some minor technical analysis, involving two of the most basic tools available: support and resistance.