FX is trending – Nomura

By FXStreet Bilal Hafeez, Research Analyst at Nomura, suggests that sometimes trends emerge without one realising, and before you know it, everyone has jumped on to it and it’s too late.

Key Quotes

“One way to get around this is to quantitatively measure the “trendiness” of currency pairs. My favourite measure is something called the Vertical Horizontal Filter (VHF). It’s in the toolkit of technical analysts and measures the size of a move within a given timeframe and adjusts that for how smooth it was.

We have calculated them for all the main G10 currency pairs over 2-, 4- and 8-week windows, which shows that the euro has not really been trending over the past 4 or 8 weeks, but has started to exhibit a trend very recently.

More interesting are the ones where the VHF value goes up in each period, so currencies like USD/JPY, GBP/USD, NZD/USD and EUR/NOK have started to see growing trends. One need not jump on to all these trends, but certainly the EUR/JPY (lower) and NZD/USD (higher) trends do look attractive from either a macro or risk-on perspective, in our view.”
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Source:: FX Street