Currency strength (Wikipedia) is basic forex technical analysis term used for current trend of currency.But how to trade with currency strength?This is main point of this article.

Introduction

Currency strength is strength of one currency and not a currency pair.That means you have simple chart with 8 lines (8 because there is 8 major currencies EUR, GBP, AUD, NZD, USD, CHF, JPY) showing you strength of every single currency.

It’s based on mathematical decorrelation of 28 cross currency pairs.It shows absolute strength momentum of selected major currency

There are two types of currency strength indicators.Relative currency strength (RCS) and Absolute currency strength (ACS) indicator.

Relative currency strength (RCS) – (Wikipedia) is a indicator showing relative strength.That means it doesn’t show you price of currency, but strengthening or weakening.On the relative strength you can see like RSI on every currency separately.The RCS is typically used on a 14*period timeframe, measured on a scale from 0 to 100 like RSI, with high and low levels marked at 70 and 30, respectively. Shorter or longer timeframes are used for alternately shorter or longer outlooks. More extreme high and low levels–80 and 20, or 90 and 10–occur less frequently but indicate stronger momentum of currency.

 

Absolute currency strength (ACS) – (Wikipedia)