The Cornerstone of Investment (Extra Edition Part 2)

The Royal Road of Investing (Outtakes Part 2)

“FXtime after the fact?”

When you look at economic indicator event calendars, events such as policy rate decisions and statements occur quite frequently. By using a currency strength indicator around the timing of these releases,“FX after-the-fact gambling”can be realized.

1.    Case 3 (AUD)

On August 2, 2022 year8 month2 day13:30 (JST), the Reserve Bank of Australia (central bank) raised the official cash rate by50 basis points (bp),1.85%. While typically a rate hike strengthens the currency, the actual outcome was(1.85%) versus expectations, so the market reacted with AUD weakening.

The chart below is the AUDJPY 5-minute chart on the day of the policy rate announcement.AUDJPY,5-minute bars.

The initial reaction to the rate hike was volatile, but then it gradually declined. After breaking below the lower wick of the volatility, we entered a sell position with a post‑facto approach. Draw a diagonal downtrend line; take profit if the price closes above it. This alone yielded72PIPS of profit.

Let’s also look at the currency strength graph. The figure below displays the “8Currency Strength Visualization Indicator” on AUDJPY’s-minute chart.

Red is AUD JPY AUD fell sharply and became the weakest currency. Meanwhile, JPY was the strongest currency at that moment. Therefore, selling the pair AUDJPY would be profitable with a post‑facto approach. If the currency strength graph for AUD turns horizontal to upward, take profit.