Editorial Contributor
Dominic Picarda is a Chartered Market Technician and has been responsible for the co-ordination of the Investor’s Chronicle’s charting coverage for four years. He is also an Associate Editor of the FT and frequently speaks at seminars and other trading events. Dominic holds an MSc in Economic History from the LSE & Political Science.
DoMiNiC PiCARDA’S TECHNiCAL TAkE CuRRENCy SPECiAL Having a weak exchange rate never seems like much fun to individuals who hold that currency. After foolishly offering to stand a meal for friends on a trip to Switzerland last year, I found myself muttering profanities when the bill came. As well as the cost of travelling abroad, there’s always a nagging sense of inadequacy, that one’s country is some sort of economic invalid. For nations as a whole, though, a cheap currency can do a world of good. A low exchange rate obviously makes it easier to sell more goods and services abroad. China and various other Asian nations have, of course, earned vast fortunes through exports thanks to their deliberately depressed currencies. But it’s more than just a way to steal a march on trading rivals — devaluation can provide vital relief during times of crisis. Sterling’s 1931 devaluation was one reason why Britain had a milder interwar depression than the US or France. Currently, numerous nations want and indeed need to improve their position via devaluation. These include those with very strong currencies, including Japan and Switzerland, and those with somewhat cheaper currencies, including Britain and the Eurozone, as well as many of the usual suspects in Southeast Asia. The catch, of course, is that not all can play this game simultaneously. One currency’s fall is, by definition, another’s rise. While not all can succeed, the determination of certain governments to cheapen their currencies should lead to some strong and tradable trends in the world of foreign exchange. As well as identifying the currencies whose fundamentals point most towards upside and downside, we can use the charts to pick where to try and jump aboard these trends.
56 | www.financial-spread-betting.com | March 2013