Technical analysts, traditionally referred to as chartists, focus on price and volume data to determine past trends that are expected to continue into the future. The single most important element of technical analysis is that future exchange rates are based on the current exchange rate. Exchange rate movements, similar to equity price movements, can be subdivided into three periods: 1) day-to-day movement, which is seemingly random; 2) short-term movements extending from several days to trends lasting several months; 3) long-term movements, which are characterized by up and down long-term trends. Long-term technical analysis has gained new popularity as a result of recent research into the possibility that long-term “waves” in currency movements exist under floating exchange rates.
Definition