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The absolute currency strength (ACS) is a technical indicator used in the technical analysis of foreign exchange markets.

It is intended to chart the current and historical gain or loss of a currency based on the closing prices of a recent trading period. It is based on mathematical decorrelation of 28 cross currency pairs. It shows absolute strength momentum of selected major currency (EUR, GBP, AUD, USD, CAD, CHF, JPY).

The ACS is typically used on a 15*period timeframe, calculated as a percentage gain or loss. This indicator is not measured on a scale like relative currency strength. Shorter or longer timeframes are used for alternately shorter or longer outlooks. Extreme high and low percentage values occur less frequently but indicate stronger momentum of currency.

ACS is in most cases used as support indicator for relative currency strength indicator. But it can be used by itself for currency trading. One can use absolute currency strength for pattern trading as well. Combination of RCS and ACS indicators gives entry and exit signals for currency trading.

Basic idea

Indicator basic idea is "buy strong currency and sell weak currency". If is X/Y currency pair in uptrend, it shows if it is due to X strength or Y weakness. On this signal one can choose the most worthy pair to trade.

Advantages for trading strategies

Absolute currency strength can be used as a support indicator for technical analysis in combination with relative currency strength. It is an information indicator to realize which currencies are being demanded, this is an ideal indicator for trend follow traders. It helps scalpers looking for strength trend (trader can see both absolute and relative strength). It is an instrument for correlation/spread traders to see reactions of each currencies on moves in correlated instruments (for example CAD/OIL or AUD/GOLD).

References

Technical analysis

Concepts

Charts

Patterns

Chart

Candlestick

Simple	Doji
Complex	Hikkake pattern Morning star Three black crows Three white soldiers

Point and figure

Indicators

Support & resistance	Fibonacci retracement Pivot point (PP)
Trend	Average directional index (A.D.X.) Commodity channel index (CCI) Detrended price oscillator (DPO) Know sure thing oscillator (KST) Ichimoku Kinkō Hyō Moving average convergence/divergence (MACD) Mass index Moving average (MA) Parabolic SAR (SAR) Smart money index (SMI) Trend line Trix Vortex indicator (VI)
Momentum	Money flow index (MFI) Relative strength index (RSI) Stochastic oscillator True strength index (TSI) Ultimate oscillator Williams %R (%R)
Volume	Accumulation/distribution line Ease of movement (EMV) Force index (FI) Negative volume index (NVI) On-balance volume (OBV) Put/call ratio (PCR) Volume–price trend (VPT)
Volatility	Average true range (ATR) Bollinger Bands (BB) Donchian channel Keltner channel CBOE Market Volatility Index (VIX) Standard deviation (σ)
Breadth	Advance–decline line (ADL) Arms index (TRIN) McClellan oscillator
Other	Coppock curve Ulcer index

Analysts

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Stock valuation	Alpha Arbitrage pricing theory (APT) Beta Buffett indicator (Cap-to-GDP) Book value (BV) Capital asset pricing model (CAPM) Capital market line (CML) Dividend discount model (DDM) Dividend yield Earnings yield EV/EBITDA Fed model Net asset value (NAV) Security characteristic line Security market line (SML) T-model
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Category:

Technical indicators

Basic idea

Advantages for trading strategies

See also

References