Strategies, analysis, and news for FX traders

April 2009
Volume 6, No. 4

THE DOLLAR-ECONOMY
connection p. 8

TACKLING THE CURRENT ACCOUNT DEFICIT:

Impact on the dollar p. 18

EURO MOMENTUM
system update p. 24

TECHNICALS SQUARE OFF

vs. fundamentals
p. 12

CURRENCY
FRONTIER:
Vietnamese dong
p. 28

CHINA CALLS
for new reserve
currency p. 40
 CONTENTS
Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Global Markets
U.S. economic rebound:
Friend or foe for the dollar? . . . . . . . . . . . .8
The dollar’s late-2008 jump was strong, but
the dollar is still relatively weak historically.
Will a return to economic health end the
“flight-to-quality” surge and put the buck
back on a downward path?
By Currency Trader Staff
On the Money
Listening to the chart . . . . . . . . . . . . . . . .12
While everyone debates the ramifications . . . .
of various policy measures, what is the
Euro/dollar chart saying?
By Barbara Rockefeller
2 April 2009 • CURRENCY TRADER
Crisis, imbalance, and
prospects for the dollar . . . . . . . . . . . . . .18
The financial crisis in the U.S. is closely tied
to the current account deficit, which will
require a steep devaluation of the dollar
to rectify. But this does not signal the end
of the dollar’s reign as the world’s reserve
currency.
By Sergio Da Silva
Trading Strategies
Revisiting the Euro
momentum system . . . . . . . . . . . . . . . . .24
An update on the performance of a momentum
swing trading strategy outlined in 2008.
By Currency Trader Staff
Advanced Strategies
And it’s one, two, three —
what are we trading for? . . . . . . . . . . . . .28
They don’t call them frontier markets for
nothing. A look at Vietnam’s currency and stock
market over the past few years.
continued on p. 4
ads0708 5/12/08 5:05 PM Page 39
 CONTENTS

Key concepts . . . . . . . . . . . . . . . . . . . . . . .35

Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Conferences, seminars, and other events.

Forex News
International Markets . . . . . . . . . . .36 China calls for “super-sovereign
Numbers from the global forex, stock, reserve currency” . . . . . . . . . . . . . . . . . .40
and interest-rate markets. The People’s Bank of China says the IMF
may already have a workable system for an
Global Economic Calendar . . . . . . . . . .39 international reserve currency.
Important dates for currency traders. By Chris Peters

New Products & Services . . . . . . . . . . . . .43

Have a question about something you’ve seen in

Currency Trader?
Submit your editorial queries or comments to
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4 April 2009 • CURRENCY TRADER

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 CONTRIBUTORS
CONTRIBUTORS

A publication of Active Trader ®

For all subscriber services:

www.currencytradermag.com
Editor-in-chief: Mark Etzkorn
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Managing editor: Molly Goad

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Associate editor: Chris Peters

cpeters@currencytradermag.com

Professor Sergio Da Silva
Contributing editor: (professorsergiodasilva@gmail.com) is
Howard Simons based in the Federal University of Santa
Catarina, Brazil, and researches inter-
Contributing writers:
Barbara Rockefeller, Marc Chandler national finance from the mainstream
perspective, with an inclination toward
Editorial assistant and neuroeconomics and econophysics. His Web site is
webmaster: Kesha Green
located at http://works.bepress.com/sergiodasilva.
kgreen@currencytradermag.com

Art director: Laura Coyle

lcoyle@currencytradermag.com

Howard Simons is president of

President: Phil Dorman

Rosewood Trading Inc. and a strategist
pdorman@currencytradermag.com for Bianco Research. He writes and
speaks frequently on a wide range of
Publisher,
economic and financial market issues.
Ad sales East Coast and Midwest:
Bob Dorman
bdorman@currencytradermag.com

Barbara Rockefeller (http://www.rts-
Ad sales
forex.com) is an international economist with a focus
West Coast and Southwest only:
Allison Chee on foreign exchange. She has worked as a forecaster,
achee@currencytradermag.com trader, and consultant at Citibank and other financial
institutions, and currently publishes two daily reports
Classified ad sales: Mark Seger
on foreign exchange. Rockefeller is the author of
seger@currencytradermag.com
Technical Analysis for Dummies (For Dummies, 2004),
Volume 6, Issue 4. Currency Trader is published monthly by TechInfo, Inc., 24/7 Trading Around the Clock, Around the World (John
161 N. Clark St., Suite 4915, Chicago, IL 60601. Copyright © 2009 TechInfo,
Inc. All rights reserved. Information in this publication may not be stored or Wiley & Sons, 2000), The Global Trader (John Wiley &
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The information in Currency Trader magazine is intended for educational pur-
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6 April 2009 • CURRENCY TRADER

 GLOBAL MARKETS

U.S. economic rebound:

Friend or foe for the dollar?
A recovering U.S. economy might not be what the doctor ordered for dollar bulls — and don’t forget
about the huge deficits the government is running.

BY CURRENCY TRADER STAFF

FIGURE 1 — EQUITIES UP, DOLLAR DOWN

D
uring Bill Clinton’s 1992 presidential As the stock market embarked on a major bull move in
campaign the slogan “It’s the economy, 2002-2003, the dollar moved steadily in the opposite direction.
stupid” was widely used against
incumbent President George H. W.
Bush, who governed over a period of economic
recession. However, when it comes to the U.S. dol-
lar, it may simply not be the economy after all.
Although that concept may sound counterintu-
itive, all one has to do is compare charts of the U.S.
dollar index and the S&P 500 index to see that for
much of this decade there has been an inverse cor-
relation between the U.S. dollar and an upwardly
trending U.S. economy and stock market (Figure 1).
Prior to the current economic malaise, the last
“official” recession that gripped U.S. soil was fairly
short-lived, a mere eight months from March 2001
to November 2001. As U.S. gross domestic product
(GDP) figures turned positive throughout the
decade, the stock market rallied and the U.S. dollar
fell into a massive long-term bear move.
Enter 2008. Early action saw the Martin Luther
King Day market panic. With the stock market
already pulling back sharply off the October 2007
record high, global equities tumbled while U.S.
markets were closed on Monday, Jan. 21, and the
U.S. Federal Reserve stepped in with a historic 0.75-
percent unscheduled slash to the federal funds rate.
But not too long after, Bear Stearns collapsed, the
financial crisis accelerated, and the reverberations
from various calamities have continued to echo to
the present day. With the U.S. economy plunging
into recession and fourth-quarter U.S. GDP coming
in at -6.3 percent, the U.S. dollar staged one of its
strongest rallies in years from July 2008 into early
Source: TradeStation
2009 (Figure 2). Go figure.

8 April 2009 • CURRENCY TRADER


“The Fed is basically standing
ready to print a lot of money,
and that typically is not good
for a currency.”
— Paul Kasriel, director of economic
research at Northern Trust Co.
At this point, the dollar’s rally in the
latter part of 2008 is a well-known
story — “flight-to-quality” buying as
money managers around the world
sought the relative safety of U.S. dol-
lar-denominated assets, as well as the
massive unwinding of various carry
trades in which the dollar was short
vs. many higher-yielding emerging-
market economies.
Another potential factor in the dol-
lar’s strength is what is called the first-
in, first-out theory — that the U.S. was
the first domino to fall in the world
economy, was the first to take aggres-
sive counteractive measures, and so
would be expected to be the first major
economy to recover. By contrast, in the
Eurozone the European Central Bank
(ECB) has come under fire for having
done too little, too late.
However, this all begs the question
of what really has been driving the
U.S. dollar, if not the economy? Also,
once the U.S. pulls out of recession —
perhaps as early as third or fourth
quarter of this year, if you believe the
more optimistic forecasts — will the
bear once again exert downward pres-
sure on the greenback? Let’s look back
at the bear market that began in 2002
CURRENCY TRADER • April 2009
FIGURE 2 — THE BIG SURGE
The dollar’s flight-to-quality surge in 2008-2009 has been punctuated
by two sharp down moves, the most recent occurring in March.
Source: TradeStation
and then examine current economic
conditions and what lies ahead for the
U.S. economy and the dollar.
The dollar bear, interest
rates, and deficits
Interest rates are a major driver in
forex, and interest rates set by central
banks will increase or decrease a spe-
cific currency’s attractiveness on the
world market. The U.S. Fed rate-cut-
ting cycle that culminated in a 2003
federal funds rate of 1.0 percent, set by
former Federal Reserve Chairman
Alan Greenspan, represented a long
period of relatively easy monetary
policy in the U.S. that put downward
pressure on the dollar.
But that wasn’t the only factor at
work. During this dollar bear period
the Euro climbed from around 0.8500
to 1.600 vs. the U.S. currency (Figure
3). Brian Dolan, chief currency strate-
gist at Forex.com, highlights the “bal-
looning U.S. trade and fiscal deficits”
which plagued the U.S. during that
time as a major negative for the buck.
Credit Suisse economist Jonathan
Basile points to the $786 billion record
current account deficit in the U.S. in
continued on p. 10
9
 GLOBAL MARKETS continued
FIGURE 3 — EURO DOUBLES
The Euro nearly doubled vs. the dollar between 2000 and 2008.
Source: TradeStation
2006. It has been shrinking in recent
years, to $731 billion in 2007 and $673
billion in 2008, but the years leading
up to 2006 were a period of growing
deficits.
“If you are consuming more than
you produce, then you are running a
current account deficit,” Basile says.
“The deficit is the amount of foreign
capital that we need to have foreigners
send us — think foreign purchases of
U.S. Treasury securities — in order to
keep everything balanced. A large cur-
rent account deficit is bearish for the
dollar because we need to attract capi-
tal.”
Of the connection between the U.S.
economy and the dollar, Jay Bryson,
global economist at Wachovia, notes:
“It boils down to the inflows and out-
flows based on the current account
deficit. Yes, the economy was growing
from 2002 to 2008, but we had a very
large current account deficit.”
Fast forward to 2009
According to Briefing.com, in recent
months the U.S. trade balance has been
contracting from September 2008’s
10
reading of -$58.1 billion to January
2009’s -$36 billion reading.
“We think the trade data has been
somewhat alarming,” says
Briefing.com’s chief market analyst Pat
O’Hare. “Exports are down 25 percent
in the past six months and imports are
down even more. We’ve seen a mean-
ingful contraction in global trade.”
Bryson believes during the next year
or two, the current account deficit will
get smaller until the economy starts to
grow in a meaningful way.
And when can that be expected?
Despite the prevalent gloom in the
first three months of 2009, some econ-
omists are calling for the U.S. economy
to pull out of recession and post posi-
tive quarterly GDP growth by either
the third or fourth quarter of this year.
Credit Suisse is forecasting a -1 per-
cent Q2 GDP, a +0.9 percent Q3 figure,
and +2 percent for Q4. That compares
to Northern Trust Company’s forecast
for a 3.2-percent decline in Q2, -0.9
percent in Q3, and +2.2 in Q4.
Some recent U.S. economic figures
have been encouraging, which has
helped spark gains in U.S. equities, a
rally that has in turn helped fuel over-
all optimism. However, some econo-
mists say caution should be used when
assessing the significance of these fig-
ures.
O’Hare says the data hasn’t been as
bad as feared, but he also points out
that in recent months economists have
been so pessimistic in their estimates
for economic reports that it created “a
lower bar to jump over.”
Also, there may be a bounce-back
factor at work in some economic data.
Looking at the latest release of the
February durable goods data, the non-
defense capital goods orders (exclud-
ing aircraft) jumped 6.6 percent. That
component of the durable goods data
is considered to be a proxy for busi-
ness investment. The 6.6-percent surge
follows declines in six of the past
seven months, including an 11.3-per-
cent decline in January and a 5.9-per-
cent drop in December, according to
O’Hare.
“It could be a temporary bounce
from an oversold condition,” he says.
“It looks encouraging on the surface,
but this is an area where you’ll want to
see where it is trending over the next
several months.”
Many economic reports tend to be
lagging economic indicators. For those
seeking a leading economic indicator
to gauge near-term improvement in
economic activity, Basile advises
watching the weekly jobless claims
data.
“Any indication that this is leveling
off would suggest consumers won’t be
as negative,” Basile says.
Recent months have seen a dramatic
rise in weekly initial jobless claims.
The report, which is issued each
Thursday morning, has surged from
the 350,000 area in March 2008 to
around 650,000 in March 2009.
“A leveling off of those layoffs
would be a relief on consumers’
April 2009 • CURRENCY TRADER
income and also an indication that
firms aren’t in the same aggressive
cost-cutting mode that they have been
in,” Basile says.
Key drivers:
Risk appetite, deficit
Once the U.S. economy pulls out of its
current negative growth syndrome,
what key factors could drive the U.S.
currency?
Some analysts suggest once the U.S.
economy and others around globe
begin to rebound, risk appetite could
return, which could result in outflows
from the dollar, which has served as
the current safe-haven parking spot
for cash. Increased risk appetite from
global money managers could ulti-
mately be a negative factor for the U.S.
dollar ahead, some say.
Another key factor down the long-
term road for the dollar could be the
U.S. budget deficit. Many economists
agree the billions of dollars the U.S.
government has been throwing at the
current financial fiasco was necessary
to prevent a full-blown depression.
However, once the U.S. finally
emerges back onto a positive growth
track, the government will need to
take steps to reduce that budget
deficit.
“If we don’t take steps to correct the
deficit once the economy improves,
that could be a negative for the dollar,”
Bryson says.
The Congressional Budget Office
(CBO) recently released forecasts esti-
mating the U.S. budget deficit in 2009
is expected to surge to between $1.67
trillion and $1.85 trillion. Not only
would such a budget deficit be a
record in actual dollar terms, but at
around 11-13 percent of GDP, it would
also represent the highest level as a
percentage of GDP since World War II.
The 2009 estimate compares to the
2008 budget deficit of $459 billion.
CURRENCY TRADER • April 2009
David Gilmore, partner at Foreign Foreign demand remains relatively
Exchange Analytics, voices strong con- strong for U.S. securities. The UK,
cerns regarding the budget deficit. however, has already run into some
“There is no free lunch,” he says. trouble in this area. March 25 saw the
“Printing currency and running up British pound weaken in the wake of a
unprecedented deficits are ingredients poorly bid gilt auction. Investors
to a permanent decline in your curren- bought only 93 percent of the 1.75 bil-
cy and higher borrowing costs for your lion pounds of 40-year gilts that were
government.” auctioned off by the UK Debt
In fact, the mid-March news that the Management office.
U.S. Federal Reserve planned to pur- “Demand was not sufficient to cover
chase as much as $300 billion of U.S. the amount offered,” Dolan says.
Treasury securities actually sparked a “International investors are balking at
sell-off in the dollar. That announce- UK funding, and it suggests a cloud
ment brought the total the Fed will over the UK currency.”
spend to up to $1.15 trillion on bond Dolan warns the biggest risk for the
purchases. U.S. dollar is if foreign investors stop
“The Fed is basically standing ready buying.

to print a lot of money and that typi-
cally is not good for a currency,” says
Paul Kasriel, director of economic
research at Northern Trust Co. “My
suspicion is that when risk aversion
goes away, we are going see global
investors decide that holding dollar-
denominated assets could be danger-
ous to their economic health. The
Treasury is issuing billions of dollars
of debt and the Federal Reserve has
tipped its hand toward inflation. The
rest of the world already owns a lot of
our debt.”
Analysts say the key is foreign
appetite for U.S. securities.
“The deficit is not a problem as long
as investors keep showing up to buy
our debt,” Dolan says. “If we have a
failed Treasury auction or demand is
not perceived to be sufficient then the
dollar has a problem, because we have
to pay higher interest rates to attract
buyers.”
The current cost of borrowing for
the U.S. government is unbelievably
low.
“We are borrowing at Treasury auc-
tions, tens of billions of dollars for one
to five years at a 0.58-percent to 1.75-
percent rate,” Dolan says.
11
 ON THE MONEY
Listening to the chart
Ideology is one thing, a chart is another.
W hen fundamentals
are too confusing
and uncertainty is
high, technicals rule.
Just about every chart these days dis-
plays a price being repelled at a resist-
ance line or supported by a key mov-
ing average, or a retracement hitting
an exact Fibonacci level.
Nobody is willing to stick his neck
out and declare a global economic
recovery is visible, however distantly.
Nobody wants to say the U.S. is mak-
ing the correct policy choices to fix the
financial sector, at least enough to get it
functioning again. Commentators are
at a loss to explain price action, and so
they are falling back on what they
think is technical analysis. Suddenly
people who admit they don’t know
FIGURE 1 — EURO/U.S. DOLLAR TECHNICAL INDICATORS
A view of the emerging correction in the Euro/U.S. dollar pair upturn from
early March.
Source: data — eSignal and Reuters Online; chart — MetaStock
12
BY BARBARA ROCKEFELLER
much about technical analysis, or who
sometimes actively dismiss it, are say-
ing with straight faces the Dow has
been above the 55-day moving average
for x number of days, or gold is near-
ing resistance. These remarks are not
really a substitute for fundamental
analysis, but in the absence of princi-
ples and rules on which to base a fore-
cast, technical indicators will have to
do.
Long-time technical analysts are of
two minds about the apparent new
interest in technical analysis. On one
hand, it demonstrates a willingness to
throw away ideology and focus on the
empirical. This is always a good thing,
since ideology often blinds one to
important truths. Traders lie. Charts do
not.
But experienced technicians also
know the newcomers trying to use
technical tools are not sincere. The
newcomers are really waiting for the
ideological battle to be won, where-
upon they will abandon technical
work in droves, scattering unflattering
comments behind them. They are
using technical ideas only as a last
resort.
The Euro/dollar chart
Figure 1 shows an emerging correction
in the Euro/U.S. dollar pair
(EUR/USD) upturn from early March.
The red 20-day moving average has
crossed above the blue 55-day, so the
Euro is a confirmed buy. But the last
three days have lower highs so we can
draw a red resistance line. Maybe the
Euro can drop to the last low (gold line
at 1.3419) and try the upside again, or
fall back to the midpoint of the big
breakout bar (dark red line at 1.3258).
It may fall short of the breakout bar
midpoint and fall only to the 32.8-per-
cent retracement level (1.3316).
If the Euro breaks resistance and
goes to the 62-percent retracement
level (1.3848), it would approach the
200-day moving average (green),
which perhaps forms resistance in its
own right. One thing is certain — once
the Euro breaks resistance, traders will
pour into the market. There might be a
retest of the December 2008 high at
1.4719, with the usual jitters around
the round number 1.4000. A retest
would then form a possible double
top, suggesting another good run for
the dollar back to the March low and
perhaps beyond.
There’s nothing much really wrong
with this view of the Euro’s prospects
— except it fails to take into account
that fundamentals can always trump
April 2009 • CURRENCY TRADER
the charts, and we will get some fun-
damental news and changes in per-
spective as the price moves are playing
out. Experienced technical analysts
know that what looks like a correction
in the Euro upswing could actually be
a reversal back to the big-picture Euro
downtrend (Figure 2).
The Euro was trending downward
from April 2008. The spikes in
December 2008 and again in March
2009 were exceptional moves caused
by events in the real world. In other
words, change the time frame, isolate
the historically significant but abnor-
mal counterswing periods, and you
still have a major Euro downtrend.
Yes, there was an upside breakout on a
specific event — the announcement of
quantitative easing by the Fed. (This
means the U.S. government is buying
its own debt paper and printing
money to fund the purchases, creating
both enormous budget deficits and a
serious inflation threat.) The Euro
breakout was, therefore, ideologically
based. The quantitative easing
announcement aroused fear of deliber-
ate “debasement” of the dollar. The
Chinese, owners of almost $2 trillion of
U.S. assets and about $800 billion of
FIGURE 2 — THE BIG PICTURE: EUR/USD
What looks like a correction in the Euro upswing could actually be a reversal
back to the big-picture Euro downtrend.
Source: data — eSignal and Reuters Online; chart — MetaStock
CURRENCY TRADER • April 2009
Treasuries, complained. In anticipation
of the announcement, gold had
already risen from $729 in October
2008 to over $1,000 on Feb. 20, 2009.
Ignoring fundamentals
By looking only at the latest corrective
move in the Euro/dollar, newcomers
are making the mistake of neglecting
fundamentals. If it was an exceptional
event that caused the spike, we need to
watch the fallout from that event to
predict the price consequences. We
may be able to trade better by drawing
moving averages and support and
resistance lines and Fibonacci retrace-
ments, but these technical indicators
measure current market sentiment;
they do not help us understand what is
really going on or predict future mar-
ket sentiment.
Consider why the Euro stopped
falling in early March. What set off this
correction? To predict the extent of the
correction, we should understand its
underlying conditions. What made
traders start buying Euros again after
10 weeks of relentless selling?
If we review the news events of
those days, the Euro hit the lowest low
just ahead of U.S. payrolls for
13
February. The next week, equity
indices started moving up at the same
time Warren Buffett was telling the
world the U.S. economy was in a
“shambles.” Risk aversion, which had
been fuelling the dollar’s rise, was
abating just as things looked their
darkest. Oil had bottomed more than a
week before and was already rising.
We were still awaiting the much-
delayed Treasury plan, and in Europe
the Eurogroup rebuffed White House
Economic Advisor Larry Summers’
plea for greater stimulus.
Of all these factors, Europe’s rejec-
tion of the U.S. approach — Keynesian
stimulus, and plenty of it — was the
turning point. We had plenty of bad
news from Europe, but through it all
European officials held fast to the idea
that deliberately creating bigger budg-
et deficits and courting inflation is not
only bad policy, but morally reprehen-
sible. It’s better to be mired in stagna-
tion than to flirt with the inflation
devil (even though official inflation
numbers were coming in well under
continued on p. 14
 ON THE MONEY continued
FIGURE 3 — EURO VS. GOLD FUTURES
Gold was already falling as the Euro was rising, but it spiked up on the day of the Fed’s
quantitative easing announcement. However, inflation fear apparently was insufficient
to keep it rising.
Source: data — eSignal and Reuters Online; chart — MetaStock
the 2-percent maximum target).
Bad news slid off the Euro’s back like Teflon. Some
European Central Bank (ECB) officials spoke of additional
rate cuts. Eastern and Central European banks were in trou-
ble because they had lent relatively cheap Euros and Swiss
francs to businesses and home owners for mortgages, and
several countries (Hungary, Lithuania, Romania) needed a
bailout from the EU and International Monetary Fund (IMF),
but Europeans hotly denied Eastern and Central Europe
were the EMU’s “subprime problem.” Economic data worse
than in the U.S. was coming along every day: German
exports and export orders fell, everybody’s industrial pro-
duction was down, and unemployment was rising. The ECB
said it could not entertain quantitative easing (buying gov-
ernment bonds) because of treaty prohibitions. And still the
Euro rose.
But then something odd happened. The U.S. said it under-
stood China’s fears about currency debasement and prom-
ised to take steps to prevent it. Treasury Secretary Timothy
Geithner announced the Public/Private Investment Plan —
an announcement without much detail and received with
much grumbling, but an announcement nonetheless.
Important participants like Pimco said it was good plan. The
Fed started buying U.S. Treasuries and the sky did not fall —
the yield curve remained stable, and new bond issues the
same week were met by strong foreign demand. Economic
data started coming in better than expected, including
durables orders, the GDP revision, and both new and exist-
ing home sales. Mortgage applications soared. Unless you
had ideological blinkers on, you could see light at the end of
14
the tunnel, and it wasn’t an oncom-
ing train.
Other factors
Figure 3 shows gold was already
falling as the Euro was rising, but it
spiked up on the day of the Fed’s
quantitative easing announcement.
Remember, quantitative easing is
thought to create inflation and gold
is a prime beneficiary of inflation
fear. But gold failed to keep going
up. We can’t read the mind of the
gold market and don’t really know
why it failed to keep rising, but it’s
enough to deduce that inflation
fear was insufficient to keep it ris-
ing. The next day, the Euro and
gold started moving down in tan-
dem.
The Reuters 10-year note yield
index (Figure 4) also spiked on the
announcement day. But it found a
bottom right afterward and is now
rising again. Yield is critical
because global investors seek the
best real (after-inflation) return. Clearly investors do not
think the government will crowd out the private sector or
that buying government paper will necessarily create infla-
tion. In fact, deflation is probably the thing we should be
worrying about more than inflation right now, as the gold
chart bears out. To a certain extent, yields rising and gold
falling is proof that the dominant fear is deflation, not infla-
tion.
We name the real rate of return “the main event.” All other
things being equal, like sovereign risk, global investors pre-
fer a higher rate. Europe has demonstrated it fears inflation
above all else, and thus we have to expect the ECB will cut
rates more but not to zero or near-zero, like the U.S., UK, and
Japan. Eurozone governments will not engage in additional
fiscal stimulus because of the inflationary implications, and
fiscal stimulus in European countries is only about 2 to 3 per-
cent of GDP, compared to more than 6 percent in the U.S.
This means Europe is being selfish and refusing to take its
share of the responsibility for global stimulus, instead piggy-
backing on the U.S. stimulus, some of which will seep out to
the benefit of European manufacturers and to Asian
economies that buy from Europe.
It also means the real rate differential will continue to
favor European bonds, although by an increasingly narrow
spread. At the end of March the 10-year Bund was yielding
3.08 percent and the equivalent U.S. Treasury note was yield-
ing 2.77 percent. This is a mere 31 pips from a yield spread of
more than 100 points a year ago. If Europe gets actual defla-
tion, though, you would add deflation to the yield to get the
continued on p. 16
April 2009 • CURRENCY TRADER
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 ON THE MONEY continued FIGURE 4 — REUTERS 10-YEAR NOTE INDEX
The Reuters 10-year note yield index spiked on the announcement day, but it
found a bottom immediately afterward it turned back up.
real return (instead of subtracting
inflation from nominal yield, as we are
accustomed to). We could be facing the
weird situation of deflation in the
Eurozone adding to real return while
inflation in the U.S. subtracts from real
return. European returns still win even
as the nominal rates converge.
The question then becomes whether
the yield differential suffices to sup-
port the Euro. The U.S. will be getting
higher real growth. How much does
real growth count to the currency mar-
ket? It’s an inconsistent and spotty
record because you can’t keep other
factors constant, but on the whole, the
country with the higher growth gets an
appreciating currency. This is the case
for the return of the dollar uptrend. It
depends, unfortunately, on the current
account deficit not racing back into Source: data — eSignal and Reuters Online; chart — MetaStock
bigger deficits, the Fed being able to
tame the inflation monster at exactly the right time, and better to do some chart work than to trade on ideology.
numerous other factors. And once ideology is seen to be rejected by the forex and
The lesson from March, if there is one, is that buying into related markets, trade with what you see on the chart — a
the ideological conventional wisdom (budget-busting and rising dollar until something comes along to change it.

costly stimulus plans cause ruinous inflation and a debased
currency) is a dangerous thing for your trading profits. It’s For information on the author see p. 6.

Other Barbara Rockefeller articles:

“Rational fear and the forex market” “The dollar-oil connection,” Currency Trader, September 2008.
Currency Trader, March 2009. As oil broke, so did the Euro/dollar pair. What can we learn from
Analysis of several intermarket relationships suggests the role of analyzing bursting bubbles?
risk aversion in the forex market is no cut-and-dried issue.
“Horizontal patterns in foreign exchange”
“Competitive devaluations, the EMU, and the yen”
Currency Trader, August 2008.
Currency Trader, February 2009.
The Euro’s price action lends itself well to dissection with
Currency devaluation never works in the long run — just ask Japan
the Darvas Box.
— but that doesn’t mean panicky governments won’t use it to try to
stem the flow of blood in the near term.
“Are the summer doldrums here?” Currency Trader, July 2008.
“The Euro: Prosperity or perdition?” If market myth is true, the season will bring a sideways
Currency Trader, January 2009. market. But the myth warrants some analysis.
The belief the Euro sell-off has ended may be based on some false
“Manias and crashes: Where will oil lead the dollar?”
assumptions about how the U.S. and Europe are handling the
Currency Trader, June 2008.
economic crisis.
Although some analysts argue a falling dollar is helping to push up
“The six Ds of depression,” Currency Trader, December 2008. oil prices, it might be the other way around. The question is, when
The buck has gotten a bounce from the recent financial panic, but will the bubble-go-round stop?
the longer-term picture isn’t quite as bullish.
“Is the Euro going to the moon?” Currency Trader, May 2008.
“Euro and dollar at parity?” Currency Trader, November 2008. A look at the Euro’s recent gravity-defying performance.
A few short months ago the world was contemplating Euro $2. Now,
“What’s really driving the dollar?” Currency Trader, April 2008.
the talk is all about Euro $1. What are the odds it will happen?
Signs of a potential turnaround in the buck can be found in an
“Crisis of confidence,” Currency Trader, October 2008. unexpected place.
As Wall Street and Washington prove themselves equally inept, the
dollar suffers.
You can purchase and download past articles at http://store.activetradermag.com.

16 April 2009 • CURRENCY TRADER

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 ON THE MONEY
Crisis, imbalance, and prospects
for the dollar
One positive aspect of the financial crisis was the boost to the dollar.
However, global imbalances have put further pressure on the future of American finance.
BY SERGIO DA SILVA
T
he ongoing financial crisis is linked to the U.S.
current account deficit, although not ultimate-
ly caused by it. Reducing the American exter-
nal deficit will require further decreases in the
value of the dollar, which will in turn boost net exports.
Nevertheless, the end of the greenback as the world’s
reserve currency is not in sight. The dollar has, in fact, ben-
efited from the financial crisis, and a current account crisis
is not likely at the present time. However, foreign reliance
on American financial markets will fade, which presents the
U.S. with the pressing task of resolving both problems.
A glimpse of the financial crisis
Since the 1940s, the amount of equity held by a bank as a
percentage of its assets, such as profit-generating loans, typ-
ically remained below 10 percent. This low equity-capital
rate allowed banks to lend generously. Before the summer
of 2006, the rate hit 10 percent. The three-month LIBOR-
overnight index swap (OIS) spread, which measures
investor perceptions of potential bank insolvency, also
remained stable until the autumn of 2007.
In August 2007, investors became scared after learning
that highly leveraged financial institutions were holding
high-risk securitized subprime mortgages. Investors there-
after demanded a larger capital cushion. The historical equi-
ty-capital rate below 10 percent was no longer viewed as
secure, and the LIBOR-OIS spread started to increase.
After the default of Lehman Brothers on Sep. 15, 2008, the
banks, responding to investor demands, began to fear for
their solvency, and stopped lending. In December 2008, for-
mer Federal Reserve chairman Alan Greenspan estimated
investors now required a 14-percent equity-capital rate
(“Banks Need More Capital,” The Economist).
To fulfill the banks’ need for more capital, temporary
government credit is currently the only alternative.
However, assuming the extra capital necessary to put an
end to the crisis cannot rely on sovereign lending on a per-
manent basis, new sources of private capital must be found.
18
Deficits that finance profitable
investment are not necessarily
ruinous, but the American deficit
reflects increasing consumption rather
than increasing investment.
Greenspan suggests the restoration of the $30 trillion
global stock-market value wiped out in 2008 could do just
that. Higher global stock prices would lead to equally high-
er levels of equity, making it easier to issue debt and recap-
italize financial institutions.
Capital gains can restore balance sheets but cannot
finance physical investment, which is related to the imbal-
ances in the U.S. current account. Between 2000 and 2008,
the U.S. received foreign investment equivalent to more
than 40 percent of its 2007 GDP. The financial system had
the job of recycling the money to borrowers. Bad incentives
were thereafter introduced. Credit became cheaper and sav-
ings declined from around 10 percent of disposable income
in the 1970s to 1 percent after 2005.
The economic growth of the past 25 years was partly
dependent on the current account deficit, which indicates
that Americans were becoming prosperous at a pace
beyond their resources.
Global economic imbalances
before the financial crisis
The U.S. current account has been in the red every year
since 1992. Until 1997 this was not so troubling, but in 2006
the deficit reached 6 percent of GDP, a level at which the
exchange rate of a currency begins to be affected.
The deficit is financed by foreign capital inflows. The U.S.
April 2009 • CURRENCY TRADER
 TABLE 1 — CURRENT
ACCOUNT BALANCE
The U.S. current account deficit has
ballooned in recent years, both in
Current account balance absolute terms and as a percentage
of GDP.
The current account is the trade balance plus the services balance. The trade Year $ (billions) % of GDP
balance measures the exports and imports of goods. The services balance 1992 -50.079 0.79%
measures the exports and imports of services, including those attributed to fac- 1993 -84.816 1.27%
tors of production, such as payments and receipt of interest and profits. 1994 -121.612 1.72%
The U.S. has been a net importer since the mid-1970s. Excluding 1991, the 1995 -113.571 1.54%
U.S. has operated with a current account deficit each year since 1982. The result-
1996 -124.773 1.60%
ing debt is then funded by the issuance of U.S. Treasury securities — T-bonds,
1997 -140.396 1.69%
T-notes, and T-bills — many of which are purchased by foreign countries. The
1998 -213.532 2.44%
largest foreign owner of U.S. treasury securities is China, which according to the
U.S. treasury held $739.6 billion worth of U.S. Treasuries at the end of January. 1999 -299.819 3.24%
Table 1 shows the U.S. current account deficit in billions of dollars as well as 2000 -417.429 4.25%
in percentage of GDP since 1992 according to the International Monetary Fund’s 2001 -382.37 3.78%
(IMF) World Economic Outlook Database. Relating the deficit to annual GDP 2002 -461.271 4.41%
shows how much the country owes compared to how much it produces. 2003 -523.413 4.78%
To put this into perspective, assume a person making $50,000 per year spent 2004 -624.999 5.35%
the same percentage of his annual income as the U.S. has spent of its GDP since 2005 -728.994 5.87%
1992. Without considering interest, or accounting for any payments on his debt, 2006 -788.115 5.98%
in those 17 years he would have accrued a $29,308 debt. As of March 18, the 2007 -731.214 5.30%
U.S. total public outstanding debt was more than $11 trillion.
2008* -664.125 4.63%
*Estimate as of March 20.
— Currency Trader staff

borrows from abroad or sells assets
— stocks, bonds, and property — to
pay for the deficit. Deficits that
finance profitable investment are not
necessarily ruinous, but the
American deficit reflects a decreasing
savings rate, which implies increas-
ing consumption rather than an
increasing investment. As a result,
the deficit has been wasted. The
deficit also implies growing foreign
ownership of American capital stock
and increasing American debt to for-
eigners.
However, despite the fact the U.S.
is a net debtor, American net invest-
ment income has remained positive
because Americans commonly earn
far higher returns on their invest-
ments abroad than foreigners do on
their American assets. This is a result
of the dollar’s special role as the
international store of value.
Considering all these facts, are cur-
rent account deficits bad? Two con-
cerns argue global imbalances must
ultimately be tackled. First, because
the deficit has been wasted on con-
sumption, foreign borrowing has not
been used to expand production
capacity, and thus borrowing may
not enhance the ability of the U.S. to
service an increasingly larger foreign
debt. Eventually, foreigners may
become less willing to lend to the
U.S. Greenspan once warned that
there is sure to be a limit beyond
which foreigners will resist holding
dollar-based assets. This can be
extended to the dollar reserves held
by the central banks of surplus coun-
tries, notably China.
Second, the current account deficit
is partly responsible for the ongoing
financial crisis because it introduced
misaligned incentives. The inflows of
foreign money raised government
bond prices, lowered interest rates,
and increased housing prices. Low
interest rates helped feed the housing
boom and encouraged Americans to
continue spending.
Who is ultimately to blame for the
continued on p. 20

CURRENCY TRADER • April 2009 19

 ON THE MONEY continued
global imbalances — profligate consumers and the govern-
ment that runs deficit budgets or the central banks of
emerging markets? The current account deficit enabled con-
sumers and the government to spend more than domestic
savings. This was made possible by the surpluses of the
emerging countries, which before 1996 had also been living
beyond their own means (in terms of their current account
FIGURE 1 — U.S. DOLLAR INDEX
As the financial crisis intensified in October 2008, the
U.S. dollar index (DXY) posted its largest monthly
gain in 17 years.
Source: eSignal
FIGURE 2 — U.S. DOLLAR/RUSSIAN RUBLE
Russia’s insufficient reserves led to a 53-percent slide
in the ruble vs. the dollar from July 2008 through
February 2009.
Source: eSignal
20
deficits), as diagnosed in 2000 in an International Monetary
Fund (IMF) pamphlet “The IMF and Human Development:
A Dialogue with Civil Society,” authored by then-Managing
Director Michel Camdessus.
Throughout the decade after 1996 — the year before the
beginning of the Asian financial crisis — the deficits became
surpluses, with China and the oil exporters accounting for
almost all of the increase in recent years. These countries
accumulated large amounts of international reserves
because of strong exports.
Federal Reserve Chairman Ben Bernanke, then a Fed gov-
ernor, argued in 2005 that neither consumer spending nor
budget deficits were the primary cause of the current
account deficit. A low level of savings in the U.S. was a pas-
sive response to the global savings glut caused by the for-
eign reserves of emerging markets.
The counterargument is that demand always comes first
and supply is its immediate consequence. The emerging
countries just wanted to make good use of their surpluses.
It was profitable for them to export capital to the U.S.,
where there are broad and liquid markets for securities.
However, if there had been no demand for their loans, they
would have had to be creative and find a better use for the
surpluses at home. Therefore, it’s up to the U.S. to resolve
the crisis and reduce its use of foreign financing.
The global economic imbalances after
the financial crisis
The IMF claimed in 2004 the American current account
FIGURE 3 — U.S. DOLLAR/JAPANESE YEN
Japan’s currency reserves helped protect the yen
against depreciation.
Source: eSignal
April 2009 • CURRENCY TRADER
deficit posed the No. 1 risk to the world
economy. Nonetheless, the predicted
crisis has not materialized. The No. 2
risk, a financial crisis in the aftermath
of the dotcom and subprime bubbles,
arrived first.
Ironically, the current account deficit,
by itself, became less of a problem after
the financial crisis struck. In the depths
of the crisis in October 2008, the dollar
rallied against most currencies, and the
U.S. was not cut off from external fund-
ing. Figure 1 shows the monthly moves
in the U.S. dollar index (DXY), which
gained 7.8 percent in October, the
index’s largest monthly gain since
October 1991. As foreign demand for
dollar assets will continue to be high,
America will continue to attract foreign
capital and the flows of savings from
emerging countries is expected to per-
sist.
The emerging countries’ strategy of
accumulating reserves proved right for
them after the financial crisis.
Countries with insufficient reserves to
insure their financial systems, such as
Russia (Figure 2), India, and Korea, suf-
fered greater currency crashes during
last year’s turmoil, whereas the curren-
cies of countries with high reserves,
such as Japan (Figure 3), China, Hong
Kong, Thailand, Israel, and Sweden,
did not depreciate; some even rose. The
crisis has since spurred some countries
to seek further self-insurance in
reserves.
Even if there was insufficient moti-
vation for the U.S. to reduce its current
account deficit before the crisis, it
remains vital for the U.S. to tackle
external imbalances to prevent future
financial crises.

Prospects for the dollar

Three factors have contributed to mak-
ing the current account deficit less of a
problem during this crisis. First, only a
fraction of the capital that flows into
the U.S. is used to finance the current
continued on p. 22

CURRENCY TRADER • April 2009 21

 ON THE MONEY continued
account deficit; much of it finances the purchases of foreign
assets by American residents. Because American invest-
ments abroad perform better than foreign investments in
the U.S., it softens the burden of the deficit.
Second, the role of the dollar as an international reserve
currency alleviates the burden of the U.S. deficit. American
liabilities are all dollar-denominated, whereas 70 percent of
the holdings of nonresident assets are denominated in the
currencies of other countries. The U.S. enjoys the unique
privilege of owing debt in its own currency and receiving
payments in the currency of its creditors. This leads to the
third factor softening the burden of the current account
deficits: dollar depreciations.
Dollar depreciation benefits the U.S. because the dollar-
denominated assets held by foreign investors and central
banks lose value. In a sense, there is “international seignior-
age,” in which the dollar’s depreciation creates profit as
debts are paid back. These “revenues” derived from dollar
depreciations are similar to an exchange-rate tax levied on
American creditors. Between 2002 and 2004, more than 75
percent of the growth of U.S. foreign debt provoked by the
current account deficit was offset by changes in the values
of nonresident assets because of the dollar’s decline.
Of course, the deficits themselves also put pressure on
the dollar to decrease. Research suggests when current
account deficits reach 5 percent of GDP, the exchange rate
starts depreciating and the current account begins to react
(Freund, Caroline L., “Current Account Adjustment in
Industrialized Countries,” International Finance Discussion
Paper No. 692, Board of Governors of the Federal Reserve
System). Considering the U.S. current account deficit is
already above this threshold, a current account recovery is
overdue. Although, as the dollar started to decline gradual-
ly from 2002, the current account deficit grew.
How deep does a decrease in dollar value have to be to
eventually balance the U.S. current account? There is a wide
scattering of estimates, partly because of the lack of consen-
sus over an appropriate model. Estimates range from 14
percent to as high as 56 percent. Whatever the extent of dol-
lar depreciation needed, American investors with assets
held abroad will continue to win.
A persistent dollar decline may, however, threaten the
currency’s role as the international reserve currency. To
escape the exchange-rate tax, foreign investors and central
banks may be willing to reduce their demand for dollars
and increase demand for the Euro, for example. There were
signs this was beginning to happen before the financial cri-
sis. However, the crisis has reversed the trend.
China has been selling American agency bonds (those
issued by government agencies other than the Treasury),
such as those offered by government-sponsored enterprises
22
(GSEs), since Fannie Mae and Freddie Mac, both GSEs, flirt-
ed with default in mid-2008, and buying Treasuries instead.
Saudi Arabia has increased its share of funds held in gold,
deposits, and cash. After suffering large capital outflows,
Russia and South Korea have been buffering their reserves
with risk-free liquid assets, preferably in dollars. Other sur-
plus countries have been adjusting their portfolios to less-
risky assets. As the emerging countries become more risk-
averse in the wake of the financial crisis, international
demand for the dollar is expected to increase. In addition,
demand for the Euro will likely decrease because the effects
of the financial crisis in the Eurozone have put the Euro at
risk of extinction.
The role of the dollar as a world reserve currency
depends on the belief the U.S. is a beacon of financial sta-
bility. The ongoing financial crisis has undermined that per-
ception. Nonetheless, for the moment, the dollar has bene-
fited from the global escape from risky assets and the
unwinding of bets made with borrowed cash. As yet there
are no signs the role of the dollar as world reserve currency
has become threatened by the financial crisis — the facts
indicate quite the contrary. The crisis has reemphasized the
centrality of the dollar as a currency.

For information on the author see p. 6.
Related reading
“What does the dollar really affect?”
Currency Trader, September 2006.
Unfounded assumptions are part and parcel of market
analysis, but crunching the numbers shows how different
markets really interact with the buck.
“Who’s afraid of the big, bad deficit?”
Currency Trader, April 2005.
Contrary to conventional wisdom, the current account deficit
does not drive the dollar, according to one strategist.
“The current account deficit’s impact
on the U.S. dollar”
Currency Trader, February 2005.
In many traders’ minds, the growing U.S. account deficit is
tied to the U.S. dollar’s long-term slide. Find out how the
dollar has behaved surrounding quarterly current account
releases since 1994.
You can purchase and download past articles at
http://store.activetradermag.com
April 2009 • CURRENCY TRADER
ads 0509 3/10/09 4:19 PM Page 49
 TRADING STRATEGIES

Revisiting the Euro momentum system

It’s been nearly a year since we first analyzed this indicator-based forex swing trading approach,
and my, how things have changed.

FIGURE 1 — EURO/U.S. DOLLAR, BY CURRENCY TRADER STAFF

PERCENT CHANGE CHART

The EUR/USD pair is currently going through its worst

T
drawdown since the Euro’s launch a decade ago. he performance of a mechanical trading system
often degrades when historical testing ends
and real trading begins because, despite their
best efforts, system designers often fail to
account for dramatically different market conditions.
The May 2008 and June 2008 issues of Currency Trader dis-
cussed a setup that traded the Euro/U.S. dollar pair
(EUR/USD) based on the relationship between short- and
long-term momentum calculations (“Short-term momen-
tum signals in the Euro” and “Euro momentum system,
interrupted”). Although the strategy was not traded with
real money after those articles were published, subsequent
monitoring of its signals show its pre- and post-publication
performance were quite different. Within a few months, the
strategy turned to the downside, and not surprisingly, this
switch corresponded to the sea change that occurred in the
markets in the latter half of 2008.
Source: TradeStation The strategy was based on a momen-
tum calculation that measures where the
FIGURE 2 — RECENT SIGNALS current price is relative to the price range
of the past n bars. For example, if a cur-
The strategy has performed poorly since mid-2008, with most of the damage rency has traded between 1.2800 and
occurring on the short side of the market.
1.2850 over the past 10 bars (a range of
0.0050) and price is currently at 1.2845,
the momentum reading would be
0.0045/0.0050 = 0.90 (or 90 percent); the
indicator would be 1.00, or 100 percent,
if the current price was at the top of the
past 10 bars’ range. The calculations are
modified to range between -1.00 and
+1.00 rather than zero and 1.00. For
example, if the most recent price was
1.2805, the momentum indicator value
would be -0.90 (-90 percent) instead of
0.10 (0.0005/0.0050).

Momentum indicator = current

price/(highn – lown)

where: n is the look-back period

This was based on using a longer-term

Source: TradeStation version of the indicator to define the
trend, and a shorter-term version to

24 April 2009 • CURRENCY TRADER

highlight countertrend moves within the trend. If the markets differently — the most obvious case being the
longer-term momentum indicator was signaling an uptrend stock market, which has a historical (and quite logical)
was in effect (with a relatively high reading), the system upside bias. Crude oil might now fall into this category
would go long when the shorter-term momentum indicator as well, although to a different degree.
was oversold. The approach was reversed for short trades. Does the EUR/USD pair fit this bill? The past seven
Initial research showed using the same indicator settings years would certainly indicate the answer is yes, but the
for both long and short trades didn’t work all that well, pri- forex market is not the equity market.
marily because the Euro, up to the point the original articles
were published, had been in a multi-year bull market. As a Little did we know how prescient those words might be.
result, the decision was made to treat the long and short continued on p. 26
sides of the market differently: The
look-back periods used to trigger short
trades were longer than those for long
trades. “Euro momentum system,
interrupted” tested the following rules
from June 2, 1998-June 2, 2003:

1. Go long on the next day’s open

when the 30-day momentum is
above 0.60 and the five-day
momentum is below -0.80
(-80 percent).
2. Go short on the next day’s open
when the 60-day momentum is
below -0.60 and the 10-day
momentum is above +0.80
(+80 percent).

The initial test results showed some

promise, but they were not outstand-
ing, and the article also contained the
following observation:

Incorporating the long/short dichoto-

my into actual trading is risky,
though, because it is based on the
market’s past, which will never be
replicated exactly in the future. The
EUR/USD’s uptrend may continue
for another year or 10 years — no one
knows — but if it ever reversed com-
pletely or even went through the kind
of intermediate-term correction it
experienced in 2005, the current set-
tings would likely underperform; the
long-side parameters would begin
producing better results for short
trades and vice versa. This is the sys-
tematic trading conundrum.
Of course, if you are confident the
market in the long-term will retain its
current characteristics, you can use
different long- and short-side parame-
ters. There are definitely valid reasons
for treating the long and short sides of

CURRENCY TRADER • April 2009 25

 TRADING STRATEGIES continued

TABLE 1 — THEN AND NOW

The 10 months since June 2008 (middle section) have wiped out on big chunk of the setup’s historical profit from the pre-
ceding eight years. Switching the momentum calculations’ look-back periods, however, resulted in fewer trades and a net
profit during this period. Unfortunately, it is impossible to know in advance when to make such adjustments.
June 2008-March 2009:
March 2000-May 2008 June 2008-March 2009 Reverse parameters
All Long Short All Long Short All Long Short
trades trades trades trades trades trades trades trades trades
Total net profit $38,330.00 $29,099.00 $9,231.00 -$7,883.00 -$981.00 -$6,902.00 $7,287.00 -$3,318.00 $10,605.00
Profit factor 2.37 2.59 1.95 0.44 0.78 0.27 3.2 0 n/a
Open position P/L $0.00 $0.00 $0.00 -$1,394.00 $0.00 -$1,394.00 $0.00 $0.00 $0.00
Total number of trades 60 40 20 9 5 4 5 1 4
Percent profitable 63.33% 65.00% 60.00% 44.44% 60.00% 25.00% 80.00% 0.00% 100.00%
Avg. trade net profit $638.83 $727.47 $461.55 -$875.89 -$196.20 -$1,725.50 $1,457.40 -$3,318.00 $2,651.25
Avg. winning trade $1,747.16 $1,824.08 $1,580.50 $1,522.75 $1,168.67 $2,585.00 $2,651.25 $0.00 $2,651.25
Avg. losing trade -$1,275.55 -$1,309.07 -$1,216.87 -$2,794.80 -$2,243.50 -$3,162.33 -$3,318.00 -$3,318.00 $0.00
Ratio avg. win: avg. loss 1.37 1.39 1.30 0.54 0.52 0.82 0.8 0 n/a
Largest winning trade $4,159.00 $4,159.00 $3,460.00 $2,585.00 $2,129.00 $2,585.00 $3,696.00 $0.00 $3,696.00
Largest losing trade -$2,340.00 -$2,330.00 -$2,340.00 -$6,721.00 -$2,565.00 -$6,721.00 -$3,318.00 -$3,318.00 $0.00
Max. consecutive
winning trades 7 5 4 2 2 1 2 0 4
Max. consecutive
losing trades 4 3 4 2 1 2 1 1 0
Source: TradeStation

Less than one year later, the equity market is in its worst The June 2008 article also highlighted the fact that the
downspin since the Great Depression, the crude oil market system “is always wrong at significant turning points — it
collapsed, and the Euro is indeed in its most severe drop in will go short when a major upside reversal is occurring and
its roughly 10-year history (Figure 1). And the system has vice versa.” The article then pointed out the potential
not adapted to the change. advantages of a stop-loss rule and a supplementary exit
rule for profitable trades. We experimented
FIGURE 3 — REVERSING THE PARAMETERS with the following settings to see if the sys-
Reversing some of the system’s basic parameters — using shorter-term momen- tem could be improved:
tum lengths to trigger short trades and longer-term momentum lengths for long
trades — resulted in fewer trades and overall profitability since mid-2008. 1. Profit target: Exit positions when the
open profit is 3 percent.
2. Stop-loss: Exit positions when the
open loss is 0.085 percent.
3. Exit any remaining trades after
nine days.

These settings were chosen because they

were median values of stable parameter
ranges in the initial test phase. For exam-
ple, exit lengths of seven to 11 days all pro-
duced comparable, moderate results, so
nine days was chosen because it was the
median of the range.
These rules improved performance in a
historical test from March 2000 through
May 2008, but they made little or no differ-
ence over the subsequent 10 months when
the Euro’s uptrend broke decisively and
volatility jumped. The Euro momentum
system’s performance suffered from June
Source: TradeStation
2008 through mid-March 2009. Figure 2
26 April 2009 • CURRENCY TRADER
 FIGURE 4 — EQUITY CURVE
The strategy is currently in its worst drawdown.

shows the signals during this period.

The first two sections of Table 1 show some key statistics
for the strategy for the March 2000-May 2008 period and
the June 2008-March 2009 period. The system was a net
loser, with most of the damage occurring from short trades
— somewhat ironic, perhaps, given the market’s switch
from uptrend to downtrend. But volatility also played a big
role: The jump at the outset of 2009 triggered a series of
long trades just as the market was turning back down,
while the subsequent rally in March triggered two losing Source: TradeStation
short trades.
The last section of the table shows
the results over the past 10 months
using reversed indicator look-back
lengths: five and 30 days for short
trades and 10 and 60 days for long
trades. Voila, the system becomes
profitable (on fewer trades, no less —
see Figure 3). Just as predicted in the
June 2008 article, the dramatic change
in the market’s trend made the set-
tings for long trades more appropriate
for short trades and vice versa.
Unfortunately, the strategy has no
way to predict that change.
Figure 4 shows the strategy is cur-
rently in its largest drawdown since
2000, but it hasn’t quite been decimat-
ed. In a future issue of Currency Trader,
we will follow up on the system again,
and look at other ways to experiment
with this trading approach.

Related reading
“Short-term momentum
signals in the Euro”
Developing a strategy that systemat-
ically identifies swing-trade entry
points in the Euro.
Currency Trader, May 2008.

“Euro momentum system,

interrupted”
Reviewing the strengths and weak-
nesses of a forex swing-trade setup
leads to a new round of strategy
refinements.
Currency Trader, June 2008.

You can purchase and

download past articles at
http://store.activetradermag.com

CURRENCY TRADER • April 2009 27

 ADVANCED STRATEGIES
And it’s one, two, three —
what are we trading for?
Another case study in why defending your currency with higher interest rates is a losing proposition.
BY HOWARD L. SIMONS
I
f you found yourself singing along with this title, you
are of a certain age. This is the chorus of Country Joe
& the Fish’s “Feel Like I’m Fixing To Die Rag,”
made famous at Woodstock in 1969. The song
actually opens:
Come on all of you big strong men
Uncle Sam needs your help again
he's got himself in a terrible jam
way down yonder in Viet Nam so
put down your books and pick up a gun we're
gonna have a whole lotta fun
Country Joe McDonald, by the way, was named after
Josef Stalin. That must have been some household.
Our purpose here is not to re-fight the Vietnam War, even
though this war has been fought and re-fought in our never-
FIGURE 1 — IS IT EVER TIME TO GO LONG THE DONG?
The VND had a long, slow and very regular devaluation vs. the dollar between 1999
and August 2007, then a brief firming period, after which it collapsed abruptly.
28
ending cultural wars for the past 40 years. Massive shocks
have a way of reverberating for a very long time. Consider
the oft-told and possibly apocryphal tale of Chinese Prime
Minister Chou En-Lai in 1972 describing the impact of the
French Revolution on Western civilization as, “too early to
tell.” All global history since 1914 has been a footnote to
World War I, we are still living with the economic after-
shocks of the New Deal, and chances are very high every-
one reading this will be living with the consequences of the
2007-2008 collapse of Wall Street’s institutional model for
the rest of their lives.
The Vietnamese dong
Credit bubbles and their aftermaths have a way of making
bull market geniuses and then dethroning them. Such was
the case for emerging markets; between May 2003 and
October 2007, the Morgan Stanley Capital International
Emerging Markets Free index rose
375 percent in U.S. dollar (USD)
terms, an annualized rate near 41.8
percent. The money flowing into
those equity markets often strength-
ened the underlying currencies’
performance. Capital inflows do
that; as we have seen in many of the
articles in this series, the linkages
between relative asset returns often
are as determinant of currency
movements as are relative interest-
rate expectations.
Markets push to extremes;
indeed, we can argue this is one of
the vital functions of a market.
Sometimes these extremes are visi-
ble in price; sometimes they are vis-
ible in geographic extension. In the
case of emerging markets, a new
term, “frontier markets,” was
coined to describe these extensions.
Vietnam and its currency, the dong
(VND) became a poster child for
frontier markets.
continued on p. 30
April 2009 • CURRENCY TRADER
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 ADVANCED STRATEGIES continued

FIGURE 2 — WHEN HIGH INTEREST RATES FAIL TO HELP

A long-term chart of the VND is
vaguely reminiscent of the way the The VND-USD normalized rate gap rose from 12 percent on Aug. 10, 2007
Brazilian real used to trade between to 265 percent on March 24, 2008.
1995 and January 1999; it had a long,
slow and very regular devaluation
between 1999 and August 2007 (Figure
1). Then, as the USD started to decline
under Federal Reserve chairman Ben
Bernanke’s loose-money fiesta be-
tween August 2007 and March 2008,
the VND actually firmed against the
greenback (a rather damning reflection
of American monetary mismanage-
ment over the period). After March
2008, the dong began a very abrupt
collapse against the dollar.
A final (so far) devaluation came
during the last week of December 2008
as the State Bank of Vietnam allowed
the VND to fall an additional 3 percent
in an attempt to stimulate the coun-
try’s export sector. Such competitive
devaluations seldom work and indeed
have the effect of impoverishing the
country doing the devaluation. But
like deficit spending, manic cutting of interest rates and tax The VND fell from 15,820 to 16,110 in just three trading
rebates, governments and central banks persist in such poli- days. By July 8, 2008, it hit 16,850.
cies out of intellectual bankruptcy as much as anything else. The dong then stabilized as it was the Americans’ turn to
abandon longstanding principles in September-October
Interest-rate differentials 2008, but after mid-October 2008, the interest-rate gap
What is interesting about the dong’s post-March 2008 col- widened and the dong collapsed to new lows. Failed
lapse is how rising interest-rate differentials between the American and Vietnamese policies intersected in time to the
VND and USD did nothing to protect the dong; while rising detriment of both countries.
three-month dong rates made the currency more expensive
to borrow, they did not rise sufficiently to forestall traders
from doing so. Dong rates rose steadily between August Vietnam simply relearned what others
2007 and January 2008, and the VND firmed in response.
But markets are discounting mechanisms, and the rising had learned before: If you try to fix
credit crunch around the world meant capital outflows
were increasingly likely. your currency rate by pushing
The normalized rate gap, which is the difference between
three-month dong and three-month dollars divided by the
three-month dollar rate, rose from 12 percent on Aug. 10,
short-term interest rates increasingly
2007 to 265 percent on March 24, 2008, as shown in Figure
2. (This normalized rate gap is used instead of the 6-9
higher, you will lose eventually.
month forward-rate ratio commonly used in this space
because there is no comparable swap market for In reality, Vietnam simply relearned what others had
Vietnamese instruments. The forward-rate ratio, as a learned before: If you try to fix your currency rate by push-
refresher, is the rate at which you can lock in borrowing for ing short-term interest rates increasingly higher, you will
three months starting six months from now, divided by the eventually lose. They could have consulted the Bank of
nine-month rate itself.) England in this matter; the BOE famously lost a similar
After March 24, 2008, the Vietnamese did in the interbank fight to George Soros in September 1992. Higher interest
market what they never did during decades of almost con- rates signal to the market the currency will fall in their
tinuous warfare: They more or less abandoned the fight. continued on p. 32

30 April 2009 • CURRENCY TRADER

ads0908 7/15/08 1:28 PM Page 39
 ADVANCED STRATEGIES continued
FIGURE 3 — VIETNAMESE GOVERNMENT BONDS
The short-term interest rate and currency moves resulted in Vietnamese bond
rates rising and the yield curve inverting by the summer of 2008.
absence; this is not the signal you want to
send.
Bond markets
What did these short-term interest-rate
moves and currency gyrations do to the
Vietnamese bond market? The answers are
very simple. First, Vietnamese bond rates
rose across the maturity spectrum. Second,
the Vietnamese yield curve moved from pos-
itively sloped to negatively sloped (inverted)
by the summer of 2008 (Figure 3, right to
left). This was a brutal combination for capi-
tal markets: Not only was money more
expensive, the shape of the curve indicates
the market expects higher short-term inter-
est rates to slow the economy.
But then the Vietnamese bond market was
rescued, after a fashion, by the deepening
world recession. Yields across the curve
peaked after mid-October and then plunged
back to April 2008 levels by the December
devaluation. Moreover, a positive slope was
restored to the yield curve. But what mar-
kets give, policymakers can and do take: The
government issued VND 36 trillion in bonds
to fund its stimulus program.
FIGURE 4 — THE RELATIVE USD RETURN ON
Unlike the case in the U.S., where VIETNAMESE STOCKS BROKE BEFORE DONG DID
policymakers can abuse the dollar’s
role as a reserve currency and fund Until June 2008, an observer would have had to conclude the Vietnamese
the American deficit at lower rates stock market and currency were unrelated.
(see “Sovereign credit risk and cur-
rencies,” Currency Trader, March
2009), the extra bond issuance halt-
ed the Vietnamese bond rally in its
tracks.

Surprising reaction
in stocks
If the reaction in Vietnamese bonds
to currency volatility was negative,
as we should expect, what was the
reaction in Vietnamese stocks? Here
we can compare the relative per-
formance of the Hanoi Stock
Exchange index to the S&P 500 in
USD terms, but we can do it only
from July 14, 2005 onward.
Remember, they call these frontier
markets because they involve bor-
derline lunacy to trade them.
continued on p. 34
 ADVANCED STRATEGIES continued
The relative performance of the
Vietnamese market peaked way back
in March 2007 (Figure 4). For those
unable to remember where this is on
the crisis timeline, it was after the
huge late-February 2007 sell-off in
stocks and the successful test of that
low in early March. Restated, the U.S.
market recovered far more rapidly
than the Vietnamese market.
The relative slide in Vietnamese
equities abated in September-October
2007, only to accelerate into June 2008,
a period in which the VND was firm-
ing. It also fell when the VND col-
lapsed after interest-rate hikes were
abandoned as a defense of the dong.
Up until June 2008, an observer would
have had to conclude the Vietnamese
stock market and currency were unre-
lated on either a lead/lag or a con-
temporaneous basis.
That shifted from July 2008 through
mid-October 2008. Now the two mar-
kets moved contemporaneously, for
better or worse, as both became meas-
ures of global risk seeking and aver-
sion. Incredibly, the relative perform-
ance of Vietnamese equities did not
plunge along with either the dong or
the end of the bond rally in December
2008. Hope springs eternal for equity
investors worldwide.
What can we conclude from this
Vietnamese case study? First, no
country should attempt to defend its
currency with higher interest rates.
The cure generally is worse than the
disease. Second, while investing in
emerging markets often is an exercise
in linked currencies and equities, the
two can remain unlinked for very
long periods of time. Third, frontier
markets and frontier currencies are so
small with respect to the pool of
investable funds sloshing around the
world that these countries are entirely
at the mercy of the capital markets.
Finally, anyone could be excused
for saying “We learned this with the
Asian crisis of 1997-1998.” Yes, but we
get to learn the same lessons over and
over.

For information on the author see p. 6.
34
Related reading:
Other Howard Simons articles
“Sovereign credit risk and currencies”
Currency Trader, March 2009.
Government actions are perversely rewarding the guilty: As a nation’s credit
rating deteriorates, its borrowing costs fall and its currency, at least temporarily,
rises.
“Minor trends make minor friends”
Currency Trader, February 2009.
Do minor currencies offer trading opportunities the majors don’t? Find
out what the numbers say.
“Let the trend be your friend: The majors”
Currency Trader, January 2009.
If currencies trend so much, why do trend followers usually have such blah
performance? This and other questions are answered in this study of currency
trends.
“The rupee and emerging markets”
Currency Trader, December 2008.
Analysis suggests India’s status as a global economic power is no accident.
“Nordic currency confusion”
Currency Trader, November 2008.
Get a handle on the dynamics of the Northern European currencies.
“The Swiss franc’s commodity connection”
Currency Trader, October 2008.
How can the Swiss currency be, of all things, a commodity currency?
“Franc-ly, my dear, I don’t give a carry”
Currency Trader, September 2008.
Investigating the Swiss franc carry trade, and what might change its dynamics.
“The short, awful life of the dollar carry trade”
Currency Trader, August 2008.
The implications of the weak-dollar policy and the dollar’s roles as a funding currency.
“Currencies and commitments”
Currency Trader, June 2008.
Find out what COT data conveys about forex price action.
“Getting carried away with the kiwi”
Currency Trader, July 2008.
What’s driving the New Zealand dollar, and how long is it likely to last?
“Currencies and stock index performance”
Currency Trader, April 2008.
Find out how stock indices relate to the performance of their currencies.
“What’s down with the Australian dollar?”
Currency Trader, March 2008.
Traders have many assumptions about the nature of the Australian dollar, but only one
of these preconceptions appears to have any impact on the currency.
“Currencies and U.S. stock-sector returns”
Currency Trader, January 2008.
This exhaustive analysis challenges some common assumptions about the relationship
between currency moves and stocks.
“Howard Simons: Advanced Currency Concepts, Vol. 1”
A discounted collection that includes many of the articles listed here.
You can purchase and download past articles at http://store.activetradermag.com
April 2009 • CURRENCY TRADER
 EVENTS
Event: 18th Annual FIA Futures
Services Division OpTech Conference
Date: April 6-7
Location: The Ritz-Carlton New York, Battery Park
For more information:
http://www.futuresindustry.org/optech-2009.asp
Event: Introduction to Hedge Funds
Date: April 14
Location: New York City
For more information: http://www.fmwonline.com
Event: The World Money Show
Date: May 11-14
Location: Las Vegas
For more information: Go to
http://www.moneyshow.com and click on “Events”
Event: Securities Operations World 2009
Date: May 27
Location: New York City
For more information: http://www.fmwonline.com
KEY CONCEPTS
Carry trades involve buying (or lending) a currency
with a high interest rate and selling (or borrowing) a cur-
rency with a low interest rate. Traders looking to “earn
carry” will buy a high-yielding currency while simultane-
ously selling a low-yielding currency.
Fibonacci series: A number progression in which each
successive number is the sum of the two immediately pre-
ceding it: 1, 2, 3, 5, 8, 13, 21, 34, 55, and so on.
As the series progresses, the ratio of a number in the
series divided by the immediately preceding number
approaches 1.618, a number that is attributed significance
by many traders because of its appearance in natural phe-
nomena (the progression of a shell’s spiral, for example), as
well as in art and architecture (including the dimensions of
the Parthenon and the Great Pyramid). The inverse, 0.618
(0.62), has a similar significance.
Some traders use fairly complex variations of Fibonacci
numbers to generate price forecasts, but a basic approach is
to use ratios derived from the series to calculate likely price
targets.
For example, if a stock broke out of a trading range and
rallied from 25 to 55, potential retracement levels could be
calculated by multiplying the distance of the move (30
points) by Fibonacci ratios –– say, 0.382, 0.50, and 0.618 ––
and then subtracting the results from the high of the price
move. In this case, retracement levels of 43.60 [55 - (30*.38)],
40 [55 - (30*.50)], and 36.40 [55 - (30*.62)] would result.
Similarly, after a trading range breakout and an up move
of 10 points, a Fibonacci follower might project the size of
CURRENCY TRADER • April 2009
Event: The 15th Forbes Cruise for Investors
Date: June 2-14
Location: Lisbon to Venice
For more information: Go to
http://www.moneyshow.com and click on “Events”
Event: International Traders Expo
Date: June 3-6
Location: Los Angeles
For more information: http://www.tradersexpo.com
Event: International Investors’ Trade Fair
Date: Sept. 4-6
Location: Düsseldorf, Germany
For more information: http://www.mdna.com
Event: International Traders Expo
Date: Nov. 18-21
Location: Mandalay Bay Resort & Casino, Las Vegas
For more information: http://www.tradersexpo.com
the next leg up in terms of a Fibonacci ratio –– e.g., 1.382
times the first move, or 13.82 points in this case.
The most commonly used ratios are 0.382, 0.50, 0.618,
0.786, 1.00, 1.382, and 1.618. Depending on circumstances,
other ratios, such as 0.236 and 2.618, are used.
Support and resistance: Support is a price level that
acts as a “floor,” preventing prices from dropping below
that level. Resistance is the opposite: a price level that acts
as a “ceiling;” a barrier that prevents prices from rising
higher.
Support and resistance levels are a natural outgrowth of
the interaction of supply and demand in any market. For
example, increased demand for a stock will cause its price
to rise, creating an uptrend. But when price has risen to a
certain level, traders and investors will take profits and
short sellers will come into the market, creating “resistance”
to further price increases. Price may retreat from and
advance to this resistance level many times, sometimes
eventually breaking through it and continuing the previous
trend, other times reversing completely.
Support and resistance should be thought of more as gen-
eral price levels rather than precise prices. For example, if a
stock makes a low of 52.15, rallies slightly, then declines
again to 52.15, then rallies again, a subsequent move down
to 52 does not violate the “support level” of 52.15. In this
case, the fact that the stock retraced once to the exact price
level it had established before is more of a coincidence than
anything else.
35
 INTERNATIONAL MARKETS
CURRENCIES (vs. U.S. DOLLAR)
Current
price vs. 1-month 3-month 6-month 52-week 52-week Previous
Rank* Country Currency U.S. dollar gain/loss gain/loss gain/loss high low rank

1 New Zealand dollar 0.56308 9.54% -2.03% -17.85% 0.8101 0.4892 13

2 Swedish krona 0.12357 9.37% -2.15% -18.68% 0.1718 0.1068 16

3 Australian dollar 0.6973 7.16% 1.93% -16.71% 0.9849 0.6005 6

4 Russian ruble 0.02983 6.42% -14.58% -25.48% 0.04334 0.02695 17

5 Brazilian real 0.44683 6.34% 3.94% -17.79% 0.6414 0.3751 12

6 Euro 1.3499 5.35% -3.69% -8.01% 1.6038 1.2329 10

7 South African rand 0.10524 4.38% 2.11% -14.36% 0.1391 0.0841 2

8 Swiss franc 0.8865 2.98% -4.57% -3.68% 1.0128 0.813 5

9 Taiwanese dollar 0.02957 2.53% -2.44% -5.32% 0.03335 0.02835 11

10 British pound 1.46342 1.39% -0.74% -20.96% 2.0192 1.3501 1

11 Canadian dollar 0.81301 1.35% -1.23% -15.84% 1.018 0.7653 7

12 Singapore dollar 0.66165 1.02% -4.47% -5.89% 0.7434 0.6 9

13 Thai baht 0.02826 0.50% -3.35% -4.69% 0.03186 0.0262 14

14 Chinese yuan 0.14661 0.10% 0.26% -0.18% 0.1466 0.1416 4

15 Hong Kong dollar 0.12903 0.00% 0.00% 0.26% 0.129 0.1279 3

16 Japanese yen 0.01023 -0.87% -7.59% 8.51% 0.01148 0.00904 15

17 Indian rupee 0.01936 -3.34% -5.19% -9.95% 0.03974 0.01843 8

As of March 26 *based on one-month gain/loss

ACCOUNT BALANCE
Rank Country 2007 Ratio* 2006 2008+ Rank Country 2007 Ratio* 2006 2008+
1 Singapore 41.395 27 36.288 42.208 13 Mexico -6.368 -0.7 -2.425 -10.588
2 Switzerland 65.534 15.8 58.708 64.106 14 France -39.363 -1.6 -27.712 -48.885
3 China 379.162 11.7 249.866 453.146 15 India -23.131 -2.1 -9.503 -32.301
4 Hong Kong 22.796 11.2 20.586 20.456 16 UK -96.687 -3.5 -77.236 -105.144
5 Netherlands 55.891 7.4 8.6 6.7 17 Australia -50.816 -5.7 -41.49 -52.988
6 Taiwan 25.402 6.8 24.661 28.365 18 U.S. -784.341 -5.7 -811.483 -788.293
7 Sweden 25.903 6 27.707 25.584 19 South Africa -18.495 -6.7 -16.608 -19.237
8 Russia 72.543 5.9 95.322 49.181 20 Spain -138.916 -9.8 -106.399 -154.849
9 Germany 175.371 5.4 147.134 174.137 Totals in billions of U.S. dollars
10 Japan 195.904 4.5 170.437 195.145 *Account balance in percent of GDP +Estimate
11 Canada 25.603 1.8 20.792 17.909 Source: International Monetary Fund,
12 Brazil 10.253 0.8 13.276 4.299 World Economic Outlook Database, October 2008

36 April 2009 • CURRENCY TRADER

 NON-U.S. DOLLAR FOREX CROSS RATES
Currency 1-month 3-month 6-month 52-week 52-week
Rank pair Symbol March 26 gain/loss gain/loss gain/loss high low Previous
1 Aussie $ / Yen AUD/JPY 68.14529 8.04% 10.15% -23.27% 104.448 55.1876 4
2 Real / Yen BRL/JPY 43.66818 7.20% 12.31% -24.27% 69.3981 36.0109 7
3 Euro / Yen EUR/JPY 131.926 6.21% 4.12% -15.25% 169.958 112.045 6
4 Aussie $ / Canada $ AUD/CAD 0.8581 5.74% 3.13% -1.02% 0.9833 0.7568 12
5 Aussie $ / Pound AUD/GBP 0.47664 5.70% 2.65% 5.39% 0.4902 0.3786 18
6 Real / Canada $ BRL/CAD 0.54987 4.93% 5.16% -2.31% 0.6719 0.4726 15
7 Real / Pound BRL/GBP 0.30543 4.88% 4.67% 4.02% 0.339 0.2441 20
8 Aussie $ / Franc AUD/CHF 0.7868 4.07% 6.74% -13.52% 1.0023 0.712 13
9 Franc / Yen CHF/JPY 86.64291 3.81% 3.13% -11.27% 105.071 74.698 3
10 Pound / Yen GBP/JPY 143.029 2.21% 7.26% -27.18% 215.863 118.782 1
11 Canada $ / Yen CAD/JPY 79.45508 2.17% 6.72% -22.47% 106.673 70.6656 5
12 Aussie $ / Euro AUD/EUR 0.51668 1.74% 5.82% -9.44% 0.623 0.4725 10
13 Franc / Canada $ CHF/CAD 1.09094 1.62% -3.45% 14.46% 1.1583 0.939 9
14 Franc / Pound CHF/GBP 0.60593 1.55% -3.90% 21.87% 0.661 0.4769 17
15 Real / Euro BRL/EUR 0.33105 0.94% 7.85% -10.63% 0.4197 0.2941 14
16 Canada $ / Pound CAD/GBP 0.55573 -0.04% -0.53% 6.49% 0.5918 0.4874 19
17 Real / Aussie $ BRL/AUD 0.64105 -0.77% 1.86% -1.30% 0.7391 0.5991 16
18 Franc / Euro CHF/EUR 0.65675 -2.26% -0.93% 4.70% 0.6992 0.6106 8
19 Canada $ / Euro CAD/EUR 0.60235 -3.80% 2.49% -8.51% 0.6745 0.5799 11
20 Pound / Euro GBP/EUR 1.08426 -3.76% 3.02% -14.07% 1.2996 1.0195 2
GLOBAL STOCK INDICES
1-month 3-month 6-month 52-week 52-week
Rank Country Index March 26 gain/loss gain/loss gain/loss high low Previous
1 Japan Nikkei 225 8,636.33 15.80% -1.18% -27.38% 14,601.30 6,994.90 4
2 Mexico IPC 20,542.25 13.83% -8.76% -19.74% 32,292.90 16,480.00 7
3 India BSE 30 10,003.10 11.71% 7.23% -23.65% 17,735.70 7,697.39 2
4 Brazil Bovespa 42,589.00 11.55% 15.53% -16.14% 73,920.00 29,435.00 1
5 South Africa FTSE/JSE All Share 21,113.73 11.13% -0.58% -13.82% 33,232.89 17,814.42 6
6 U.S. S&P 500 832.86 10.63% -4.58% -31.35% 1,440.24 666.79 11
7 Canada S&P/TSX composite 8,995.50 9.88% 4.15% -25.82% 15,154.80 7,479.96 8
8 Hong Kong Hang Seng 14,108.98 9.41% -0.53% -24.48% 26,387.40 10,676.30 3
9 Australia All ordinaries 3,586.30 8.76% 2.03% -27.32% 6,059.50 3,090.80 5
10 Singapore Straits Times 1,758.79 8.74% 1.92% -92.82% 3,269.88 1,455.47 9
11 Germany Xetra Dax 4,259.37 8.03% -7.99% -29.75% 7,231.86 3,588.89 13
12 France CAC 40 2,892.07 5.36% -7.62% -30.54% 5,142.10 2,465.46 12
13 Switzerland Swiss Market 4,966.70 4.11% -8.02% -27.13% 7,785.20 4,235.00 15
14 Italy MIBTel 13,217.00 3.47% -11.28% -35.83% 26,458.00 10,347.00 14
15 UK FTSE 100 3,925.20 0.25% -9.13% -22.86% 6,377.00 3,460.70 10
GLOBAL SHORT-TERM INTEREST RATES
Country Interest rate Rate (%) Last change Sept. 08 March 08
U.S. Fed funds rate 0-0.25 0.5 (Dec. 08) 2 2.25
Japan Overnight call rate 0.1 0.2 (Dec. 08) 0.5 0.5
Eurozone Refi rate 1.5 0.5 (March 09) 4.25 4
UK Repo rate 0.5 0.5 (March 09) 5 5.25
Canada Overnight funding rate 0.5 0.5 (March 09) 3 3.5
Switzerland 3-month Swiss Libor 0.25 0.25 (March 09) 2.75 2.75
Australia Cash rate 3.25 1.00 (Feb. 09) 7 7.25
New Zealand Cash rate 3 0.50 (March 09) 7.5 8.25
Brazil Selic rate 11.25 1.50 (March 09) 13.75 11.25
Korea Overnight call rate 2 0.5 (Feb. 09) 5.25 5
Taiwan Discount rate 1.25 0.25 (Feb. 09) 3.5 3.5
India Repo rate 5 0.5 (March 09) 9 7.75
South Africa Repurchase rate 9.5 1.00 (March 09) 12 11
GLOBAL BOND RATES
Rank Country Rate March 26 1-month 3-month 6-month High Low Previous
1 U.S. 10-year T-note 123.65 1.59% -2.89% 7.70% 128.65 111.15 3
2 UK Short sterling 98.45 0.33% 0.22% 4.66% 98.705 93.595 2
3 Germany BUND 123.08 -0.09% -1.47% 8.15% 126.53 109.65 1
4 Australia 10-year bonds 95.49 -0.30% -0.43% 1.15% 96.16 93.18 4
5 Japan Government Bond 138.51 -0.80% -0.72% 0.95% 141.9 132.09 5

CURRENCY TRADER • April 2009 37

 INTERNATIONAL MARKETS continued

Gross Domestic Product*

Release 1-year Next Release 1-year Next
Period date Change change release Period date Change change release
AMERICAS AFRICA
Argentina Q4 3/18 5.0% 21.4% 6/18 S. Africa Q4 2/24 0.8% 11.0% 5/26
Brazil Q4 3/10 0.0% 8.8% 6/9
Canada Q4 3/2 -3.5% 1.0% 6/1 ASIA AND SOUTH PACIFIC
EUROPE Australia Q4 3/4 -0.5% 0.3% 6/3
France Q4 2/13 -0.9% 0.9% 5/15 Hong Kong Q4 2/25 1.5% -2.6% 5/15
Germany Q4 2/13 -1.2% 0.6% 5/15 India Q4 2/27 11.1% 14.0% 5/29
UK Q4 3/27 1.0% 0.0% 6/30 Japan Q4 2/16 -1.7% -6.6% NLT 5/20
Singapore Q4 2/27 -0.5% -5.6% NLT 5/22
* Final estimates, at current prices, seasonally adjusted

Unemployment
Release 1-year Next Release 1-year Next
Period date Rate Change change release Period date Rate Change change release
AMERICAS
Argentina Q4 2/25 7.3% -0.5% -0.2% 4/27 ASIA AND SOUTH PACIFIC
Brazil Feb. 3/26 8.5% 0.3% -0.2% 4/24 Australia Feb. 3/12 5.2% 0.4% 1.3% 4/9
Canada Feb. 3/13 7.7% 0.5% 1.8% 4/9 Hong Kong Dec.-Feb 3/17 5.0% 0.4% 1.7% 4/20
EUROPE Japan Feb. 3/31 4.4% 0.3% 0.5% 5/1
France Q4 3/5 8.2% 0.6% 0.3% 6/4 Singapore Q4 1/30 2.6% 0.4% 0.9% 4/30
Germany Feb. 3/31 7.4% 0.1% -0.2% 4/30
UK Nov.-Jan. 3/18 6.5% 0.5% 1.3% 4/22

CPI
Release 1-year Next Release 1-year Next
Period date Change change release Period date Change change release
AMERICAS AFRICA
Argentina Feb. 3/11 0.0% 6.8% 4/14 S. Africa Feb. 3/25 1.2% 8.6% 4/29
Brazil Feb. 3/11 0.6% 5.9% 4/8
Canada Feb. 3/29 0.7% 1.4% 4/17 ASIA AND SOUTH PACIFIC
EUROPE Australia Q4 1/28 -0.3% 3.7% 4/23
France Feb. 3/12 0.4% 0.9% 4/10 Hong Kong Feb. 3/20 -0.7% 0.8% 4/23
Germany Feb. 3/10 0.6% 1.0% 4/9 India Feb. 3/31 0.0% 9.6% 4/30
UK Feb. 3/24 0.8% 3.2% 4/21 Japan Feb. 3/27 -0.3% -0.1% 5/1
Singapore Feb. 3/23 0.6% 1.9% 4/23

PPI
Release 1-year Next Release 1-year Next
Period date Change change release Period date Change change release
AMERICAS AFRICA
Argentina Feb. 3/11 0.1% 7.0% 4/14 S. Africa Feb. 3/26 -0.3% 7.3% 4/30
Brazil Feb. 3/9 0.3% 7.4% 4/7
Canada Feb. 3/31 0.4% 1.6% 4/30 ASIA AND SOUTH PACIFIC
EUROPE Australia Q4 1/27 1.3% 6.4% 4/20
France Jan. 3/5 -2.0% -2.7% 4/2 Hong Kong Q4 3/13 0.4% 3.9% 6/12
Germany Feb. 3/20 -0.6% 0.9% 4/21 India Feb. 3/13 -0.6% 3.6% 4/10
UK Feb. 3/6 -0.3% 8.5% 4/9 Japan Feb. 3/11 -0.4% -1.1% 4/13
Singapore Feb. 3/27 0.9% -17.2% 4/29

LEGEND:
Change: Change from previous report release. NLT: No later than. Rate: Unemployment rate.
As of March 30.

38 April 2009 • CURRENCY TRADER

 GLOBAL ECONOMIC CALENDAR APRIL/MAY
April
Legend
CPI: Consumer price index 1 U.S.: March ISM index 22 Australia: Q1 CPI
ECB: European Central Bank Mexico: March employment report
2 France: February PPI
FDD (first delivery day): The UK: February employment report
first day on which delivery of a ECB: Governing council
commodity in fulfillment of a interest-rate announcement 23 Hong Kong: March CPI
futures contract can take place. Mexico: April 15 CPI
FND (first notice day): Also 3 U.S.: March employment report
known as first intent day, this is LTD: April U.S. dollar index options 24 Brazil: March employment report
the first day on which a clearing- (ICE); April currency options
house can give notice to a buyer 25
of a futures contract that it 4
intends to deliver a commodity in 26
fulfillment of a futures contract. 5
The clearinghouse also informs 27
the seller. 6
FOMC: Federal Open Market
28 U.S.: March durable goods
Committee 7 Brazil: March PPI
29 U.S.: Q1 GDP (adv.); FOMC
GDP: Gross domestic product Japan: Bank of Japan interest-rate
interest-rate announcement
ISM: Institute for supply announcement
management
South Africa: March CPI
Mexico: March 31 CPI; March PPI
LTD (last trading day): The final 30 U.S.: March personal income
day trading can take place in a 8 Brazil: March CPI
futures or options contract. Canada: March PPI
PMI: Purchasing managers 9 Australia: March employment report France: March PPI
index Canada: March employment report Germany: March employment
PPI: Producer price index Germany: March CPI report
Economic Release time UK: March PPI; Bank of England India: March CPI
release (U.S.) (ET) interest-rate announcement South Africa: Q1 employment
GDP 8:30 a.m. report; March PPI
CPI 8:30 a.m. 10 France: March CPI
ECI 8:30 a.m. India: March PPI May
PPI 8:30 a.m.
ISM 10:00 a.m. 11 1 U.S.: April ISM index
Unemployment 8:30 a.m. Japan: March employment report
Personal income 8:30 a.m.
12
and CPI
Durable goods 8:30 a.m. 13 Japan: March PPI
Retail sales 8:30 a.m. 2
Trade balance 8:30 a.m. 14 U.S.: March PPI and retail sales
Leading indicators 10 a.m. 3
15 U.S.: March CPI; Fed beige book
APRIL 2009 4
29 30 31 1 2 3 4
16 U.S.: March housing starts
5
5 6 7 8 9 10 11 17 Canada: March CPI
6
12 13 14 15 16 17 18
18
19 20 21 22 23 24 25 7 Australia: April employment report
26 27 28 29 30 1 2 19 Brazil: April PPI
20 U.S.: March leading indicators Mexico: April 30 CPI; April PPI
MAY 2009 UK: Bank of England interest-rate
Australia: Q1 PPI
26 27 28 29 30 1 2 announcement
Hong Kong: January-March
3 4 5 6 7 8 9 ECB: Governing council
employment report
10 11 12 13 14 15 16 interest-rate announcement
17 18 19 20 21 22 23 21 Canada: Bank of Canada
interest-rate announcement 8 U.S.: April employment report
24 25 26 27 28 29 30 Brazil: April CPI
Germany: March PPI
31 1 2 3 4 5 6 Canada: April employment report
UK: March CPI
The information on this page is UK: April PPI
subject to change. Currency LTD: May U.S. dollar index options
Trader is not responsible for
the accuracy of calendar dates (ICE)
beyond press time.

CURRENCY TRADER • April 2009 39

 FOREX NEWS

China calls for “super-sovereign reserve currency”

China’s central bank governor points to the global spread of the economic crisis as a sign
of a broken international monetary system, and argues for the adoption of a new non-dollar
international reserve currency.
FIGURE 1 — U.S. DOLLAR/SPECIAL DRAWING RIGHT
BY CHRIS PETERS China has proposed using the IMF's reserve asset as an international currency.

O n March 23 China’s central

bank governor Zhou
Xiaochuan released a statement titled
“Reform the International Monetary
System,” in which he called for a
replacement of the U.S. dollar as the
world’s reserve currency with a “super-
sovereign” international reserve curren-
cy. In his statement, the views of which
he first expressed in a speech in early
February, Zhou wrote, “the internation-
al community, particularly the IMF
(International Monetary Fund), should at
least recognize and face up to the risks
resulting from the existing system.”
As stated in the release, the outbreak of the global eco- Drawing Right (SDR), citing its potential and referring to it
nomic crisis reflects “the inherent vulnerabilities and sys- as the “light in the tunnel for the reform of the internation-
temic risks in the existing international monetary system.” al monetary system.”
The release went on to promote the use of the IMF’s Special First established in 1969 and linked to the price of gold,

Micro forex futures begin trading

C ME Group’s E-micro forex futures got off to a mod-
est start in their first week of trading. The March 23
release featured six currency pairs representing one-tenth
the size of the exchange’s standard-size contracts. The
available pairs include EUR/USD (M6E), USD/JPY (M6J),
GBP/USD (M6B), USD/CAD (M6C), AUD/USD (M6A),
USD/CHF (M6S).
Table 1 shows the daily volume for each contract through
the first week of trading. The cash-settled contracts traded
a combined total of 27,269 contracts in their first five days,
equal to about 12 percent of the average daily volume of the
CME’s Euro/U.S. dollar contract.
Year-over-year average daily volume (ADV) in forex
futures on the exchange fell by 10 percent in February to
512,000 contracts per day after falling 22.8 percent in
January. Exchange-wide ADV was down 28 percent from
February 2008.

TABLE 1 — E-MICRO VOLUME

The CME Group’s E-micro FX futures managed to attract some volume in their first week, but not much compared to other
contracts on the exchange.
AUD/USD EUR/USD GBP/USD USD/CAD USD/CHF USD/JPY TOTAL
March 23 392 327 140 140 112 82 1,193
March 24 588 1,507 900 149 125 287 3,556
March 25 616 4,984 1,609 460 253 1,399 9,321
March 26 196 2,479 2,650 98 49 2,532 8,004
March 27 316 1,523 799 367 367 1,823 5,195
27,269

40 April 2009 • CURRENCY TRADER

the SDR is an international reserve asset used as a claim for
member nations to exchange for assets under the IMF’s con-
trol in times of need. The IMF describes it as “neither a cur-
rency, nor a claim on the IMF” but as “a potential claim on
the freely usable currencies of IMF members…[a]nd its
main function is to serve as the unit of account of the IMF
and some other international organizations.” It is linked to
a basket of currencies that includes the U.S. dollar, the Euro,
the Japanese yen, and the British
pound. The value of the SDR is posted
daily on the IMF’s Web site. Figure 1
shows the SDR value in U.S. dollars
from the beginning of 2008 through March 27, 2009. (Click
here for more information on the SDR.)
The release also offered some advice on improving the
SDR in preparation for use as an international reserve.
Suggestions included expanding the number of currencies
included in its valuation, weighting each currency by GDP,
and creating financial assets and securities denominated in
SDR.

Swiss central
bank lowers rates
T he Swiss National Bank (SNB)
decided to lower its target rate
0.25 percent on March 12 to a range of
0-0.75 percent, its lowest level in a
decade. The SNB has steadily eased
its rate since October when it was
around 2.5 percent.

FIGURE 1 — U.S. DOLLAR/

SWISS FRANC
The Swiss franc fell 2.9 percent
against the dollar following the
Swiss National Bank’s most recent
interest-rate announcement.

Source: eSignal

In the same announcement, the

central bank also said it would begin
combating the recent rise in the Swiss
franc (CHF) by purchasing foreign
currencies on the foreign exchange
market, an unprecedented move by a
central bank in the current crisis.
continued on p. 42

CURRENCY TRADER • April 2009 41

 INDUSTRY NEWS continued

“The value of the Swiss franc has increased substantially
since the beginning of the financial crisis in August 2007,”
the bank announced in its policy assessment. “Under the
present circumstances, this represents an inappropriate
tightening of monetary conditions.”
The dollar rose 2.9 percent against the franc following the
announcement (Figure 1). However, after the U.S. Federal
Open Market Committee rate decision on March 18 the fol-
lowing week, the franc turned around and USD/CHF fell
3.7 percent, and another 1.3 percent the next day.

CURRENCY FUTURES SNAPSHOT The information does NOT constitute trade signals. It is intended only to provide a brief synopsis of each market’s
as of March 27 liquidity, direction, and levels of momentum and volatility. See the legend for explanations of the different fields.
Market Symbol Exchange Volume OI 10-day move/% rank 20-day move/% rank 60-day move/% rank Volatility ratio/rank
Eurocurrency EC CME 198.5 134.3 3.13% / 31% 4.80% / 26% -5.33% / 38% .50 / 88%
Japanese yen JY CME 81.0 88.3 -0.08% / 9% -0.07% / 5% -7.93% / 87% .33 / 78%
British pound BP CME 72.3 76.0 2.37% / 33% -0.12% / 0% -0.53% / 0% .41 / 92%
Canadian dollar CD CME 39.8 61.4 3.14% / 33% 2.74% / 68% -0.83% / 5% .50 / 85%
Australian dollar AD CME 39.1 46.2 5.29% / 57% 7.14% / 74% 0.32% / 8% .63 / 90%
Swiss franc SF CME 33.8 31.3 3.97% / 82% 2.43% / 23% -7.34% / 49% .56 / 88%
Mexican peso MP CME 11.0 40.4 1.32% / 0% 4.68% / 100% -2.41% / 2% .18 / 68%
U.S. dollar index DX ICE 6.4 20.9 -2.68% / 36% -2.92% / 27% 3.35% / 34% .60 / 90%
New Zealand dollar NE CME 2.3 14.3 8.66% / 45% 12.80% / 100% -0.94% / 2% .52 / 90%
E-Mini eurocurrency ZE CME 2.0 2.1 3.13% / 31% 4.80% / 26% -5.33% / 38% .50 / 88%
Note: Average volume and open interest data includes both pit and side-by-side electronic contracts (where applicable). Price activity is based on pit-traded contracts.

LEGEND:
Managed money: Barclay Trading Group’s Volume: 30-day average daily volume, in thousands.
currency trader rankings for February 2009 OI: 30-day open interest, in thousands.
Top 10 currency traders managing more than $10 million 10-day move: The percentage price move from the
as of Feb. 28, ranked by February 2009 return. close 10 days ago to today’s close.
20-day move: The percentage price move from the
2009 $ Under close 20 days ago to today’s close.
Rank Trading February YTD mgmt.
advisor return return (millions) 60-day move: The percentage price move from the
close 60 days ago to today’s close.
1. Friedberg Comm. Mgmt. (Curr.) 5.23% -13.82% 80.0 The “% rank” fields for each time window (10-day
2. Gain Capital Mgmt (MAC 4X) 2.29% 3.36% 10.7 moves, 20-day moves, etc.) show the percentile rank
3. 24FX Management Ltd 2.17% 4.11% 24.3 of the most recent move to a certain number of the
4. Arsago Premium Currencies 2.01% 3.52% 185.2 previous moves of the same size and in the same
5. Geo Economic Mgmt. System Ltd 1.92% 4.63% 45.6 direction. For example, the % rank for 10-day move
6. Excalibur Absolute Return Fund 1.77% 2.31% 28.7 shows how the most recent 10-day move compares to
the past twenty 10-day moves; for the 20-day move,
7. JB Currency Hedge (Discr Seg Port) 1.61% 3.92% 11.6
the % rank field shows how the most recent 20-day
8. FX Concepts (GCP) 1.45% -0.62% 3,682.0
move compares to the past sixty 20-day moves; for
9. Gain Capital Mgmt (MAC 2X) 1.34% 1.91% 10.7 the 60-day move, the % rank field shows how the
10. Cable Forex Fund 1.31% 2.75% 20.0 most recent 60-day move compares to the past one-
hundred-twenty 60-day moves. A reading of 100%
Top 10 currency traders managing less than $10 million and more than means the current reading is larger than all the past
$1 million as of Feb. 28, ranked by February 2009 return. readings, while a reading of 0% means the current
1. Astor Capital Mgmt (Gibraltar FX) 13.16% 10.46% 1.5 reading is lower than the previous readings.
2. Quiddity (FX) 6.00% 6.75% 6.0 Volatility ratio/% rank: The ratio is the short-term
3. Wealth Builder Fx Group Limited 4.23% 8.09% 1.2 volatility (10-day standard deviation of prices) divided
by the long-term volatility (100-day standard deviation
4. Quant Trading, LLC (FX Quant 11) 3.42% 11.69% 1.1
of prices). The % rank is the percentile rank of the
5. Spot Forex Mgmt. (Lausanne) 2.20% 5.06% 5.0 volatility ratio over the past 60 days.
6. EMC Capital Mgmt (Currency) 2.07% 2.47% 2.6
7. FEM Currency Portfolio Ltd 1.96% 2.36% 1.8 This information is for educational purposes only.
Currency Trader provides this data in good faith, but
8. Capricorn Advisory Mgmt (fxMT Growth) 1.66% 3.39% 1.0
assumes no responsibility for the use of this infor-
9. Sagacity (HedgeFX100) 1.32% -0.02% 1.2
mation. Currency Trader does not recommend buy-
10. Chariot Capital Mgmt (Abs. Return) 1.29% 2.02% 1.0 ing or selling any market, nor does it solicit orders to
Source: BarclayHedge (http://www.barclayhedge.com). Based on estimates of the composite of all buy or sell any market. There is a high level of risk
accounts or the fully funded subset method. Does not reflect the performance of any single account. in trading, especially for traders who use leverage.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. The reader assumes all responsibility for his or her
actions in the market.

42 April 2009 • CURRENCY TRADER

 NEW PRODUCTS & SERVICES

Interbank FX (IBFX) has partnered with Dow Jones
to offer its customers real-time global news and information
in four different languages via Dow Jones Newswire’s FX
Select service. The news feed, available to live account hold-
ers, will be delivered to the customer’s trade terminal upon
logging on to the IBFX MetaTrader platform. IBFX has con-
tracted for FX Select, DN Forex News in Arabic, DJ Chinese
Forex Service, and DJ Forex Russian Service.

GAIN Capital Holdings acquired a controlling stake
in Fortune Capital Co. Ltd., a privately owned provider of
forex trading services in Japan. Fortune Capital will intro-
duce new products and services, including a localized ver-
sion of GAIN’s trading platform, charting tools, and real-
time FX news and commentary. Also, GAIN Capital’s
Forex.com division is now offering spot gold trading. For
more information and to register for a free practice account,
visit http://www.forex.com.

FXstreet.com has launched a news feed focusing on
forex (http://www.fxstreet.com/news/technical-news).
This 24-hour service covers in real-time the most relevant
movements of the most traded pairs, including majors,
small dollars, and major crosses. The journalists and traders
team of FXstreet.com offer up to 30 forex news items per
day. Expert analysis and commentary are also added, and
the feed includes stocks and commodities news (gold and
oil) when important movements occur. Economic indicators
are covered as well. The forex news feed also exists in
Spanish (http://www.FXstreet.es).

Alpari, a regulated foreign exchange company and
online forex trading provider, has launched new research,
information, and trading services for all Live Account hold-
ers. Alpari has collaborated with Trading Central, an inde-
pendent financial research provider, to provide free techni-
cal analysis alerts and reports from experts on forex, equi-
ties, index futures, commodities, and bonds. Alpari is pro-
viding clients with the opportunity to trade with a fifth dec-
imal price feed on Live Accounts, and introduced a new e-
mail feature that directs clients to a calendar hosted on the
company Web site, http://www.alpari-us.com.

CQG has released CQG Integrated Client 7.9, the glob-
al market data, analytics, and electronic trading front-end
for professional traders. CQG now displays up to four con-
dition values directly on the DOMTrader, the platform’s
most popular trading interface. Exchange-traded spread
trading is available directly from two new spread quote dis-
plays: Spread Matrix and Spread Pyramid. CQG’s charting,
portfolio management, custom studies, and analytics can be
combined with the spread-trading interfaces. Charting and
CURRENCY TRADER • April 2009
analytics now include yield and forward curves, which plot
both real-time and historical data in a customizable chart.
CQG has added a suite of XData Studies that analyze pro-
prietary data down to the millisecond, and introduced eco-
nomic release data available both as stories in CQG News
and as quotes in one of their eight quote displays. CQG also
introduced CQG Direct, a new customer network offering
ultra-low latency connectivity to its order routing and mar-
ket data delivery systems. Clients can connect to the CQG
Direct network in a number of global data centers selected
for their proximity to major exchanges in Chicago, New
York, and London. CQG Direct is engineered to provide
customers market data and order execution connections via
local network access to CQG’s market data and trading
gateways. CQG also provides hosting services to clients
who require fast connections but do not have presence in
the data centers.

HedgeStreet.com has added four event-focused
binary options contracts. The contracts include initial job-
less claims, European Central Bank rate announcements,
nonfarm payrolls, and the unemployment rate. The new
contracts will be available to trade on the same online
exchange as HedgeStreet’s binary and bungee contracts.
The determination for the event contract outcomes is based
on official reporting from government agencies.

Alyuda Research, a global trading and forecasting
software vendor, has released Tradecision 4.6, an applica-
tion for charting, technical analysis, and creating trading
systems. Tradecision is offered in two different editions:
Professional Edition and Professional Real-Time Edition.
For more information, visit http://www.tradecision.com.

Advent Software has partnered with BIDS Trading.
Clients of Advent’s trade order management solution,
Moxy, can search for block liquidity in both the BIDS alter-
native trading system (ATS) and the New York Block
Exchange (NYBX). The BIDS ATS is accessible to both buy-
side and sell-side firms that want to trade blocks through
continuous order matching and trade negotiation, and
allows traders to control their level of information disclo-
sure. Market participants can choose to auto-execute their
order or negotiate, they can set their minimum block size to
help protect their order, and they can filter counterparties
based on past trading behavior.
Note: New Products and Services is a forum for industry businesses to
announce new products and upgrades. Listings are adapted from press releas-
es and are not endorsements or recommendations from the Active Trader
Magazine Group. E-mail press releases to editorial@currencytradermag.com.
Publication is not guaranteed.
43
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