FX is Trending – Nomura
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.”
(Market News Provided by FXstreet)