- This article, written by Alan Collins is taken from the FX Trader Magazine (JAN/MARCH 2013 issue).
The Relative Strength Indicator, created by Welles Wilder, has long been used by many market participants in their analysis. For the most part this application has been applied via daily charts, or longer periods, primarily as a means to identify trend. But there are a number of methods that RSI can be used for;
- As a measure of an overbought/oversold situation.
- An indicator of the underlying trend & of trend breaks.
- A buy/sell signal when the 50% line is crossed.
- An indicator of possible Divergence
For the investor or proprietary trader these methods are without doubt tools that, taken in context with other technical indicators, will prove useful. But do they work, and can they be successfully employed, in shorter intraday time frames? In this article I will use the same hourly GBPUSD chart, and the same 8 period RSI, and apply the four methods above to illustrate how to use them and assess whether they’re likely to be beneficial. Lastly I’ll add a lesser known but powerful number of other situations were only warnings of what turns out to be minor profit taking rallies inside the more pronounced trend.
Editors’ Picks
EUR/USD holds above 1.0700 ahead of key US data
EUR/USD trades in a tight range above 1.0700 in the early European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays above 156.00 after BoJ Governor Ueda's comments
USD/JPY holds above 156.00 after surging above this level with the initial reaction to the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Sei Price Prediction: SEI is in the zone of interest after a 10% leap
Sei price has been in recovery mode for almost ten days now, following a fall of almost 65% beginning in mid-March. While the SEI bulls continue to show strength, the uptrend could prove premature as massive bearish sentiment hovers above the altcoin’s price.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.
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