Inside the Currency Market: Mechanics, Valuation and Strategies

Inside the Currency Market describes both the underlying dynamics that drive this market and the strategies that can help you capture consistent profits in it. Page by page, this reliable guide skillfully discusses the structure of the market, its roles in the global economy, the forces that drive currency values, trading strategies, and tactics. It also offers a detailed understanding of how global financial flows, derivatives, and other markets such as oil and gold impact currencies.

Introduction:

This book answers the question what are the components, the constituent factors that comprise the second side of a currency-pair equation and how should those factors be considered in terms of a trade strategy. A currency pair comprises two sides, a two-nation perspective. In order to understand a currency-pair combination, both sides of the pair must be considered from the two-nation perspective.  The two-nation perspective was fully outlined in this text with not only the trader in mind but researchers, market professionals, and present and future students of the markets.

The genesis of the book framework was derived from the many biases I saw over the years from the academic journals, trader publications, or years of prior books. Each book, each article, and each journal publication offered a point, an insight that would help the reader further his or her knowledge. But each publication taught a perspective, an insight that would eventually lead to the overall understanding of the two-nation operational framework. Yet years may pass before the full learned concepts could actually become operational in a trade strategy and understanding of the market due to the proper knowledge never advanced in one publication. Publications had biases, toward the U.S. dollar side of the currency-pair equation, with no consideration of the second part of the pair.

Spot-currency prices move in the markets based on factors of interest rates but interest rates between two nations rather than one side of a currency pair. The question must then be asked: How does the second nation calculate and factor interest, and what market instruments are available to track the various rates that trade every day in the markets in order to track a trade throughout the various markets?

To trade Australian dollar/Japanese yen, one must understand Japanese TIBOR and Euroyen rates in terms of bank bills and Overnight Cash Rates in Australia. To trade U.S. dollar/Canadian dollar, one must know the U.S. Fed funds rates in relation to Canada’s CORRA and OMMFR interest rates. How those specifi c interest rates trade and direction of their movements can have profound effects on currency-pair prices.

This book sets out to outline the two-sided currency-pair trade from a whole host of perspectives as it relates nation to nation. It addresses currency pairs from the eight major nations because that is where the vast majority of trade occurs.

Contents:

• Foreign Exchange Reports
• Currency Trading Beyond the Basics
• Exchange Rates and Trade Weight Indices
• Short-Term Interest Rates and Money Market Instruments
• LIBOR
• Government Bonds, Yields, Yield Curves, and Currency Prices
• Swaps and Forwards
• Stock and Bond Markets
• Currency Cycles, Currency Futures, Options, and Volatility
• Technical Analysis

Inside the Currency Market: Mechanics, Valuation and Strategies By Brian Twomey pdf