Monday, January 4, 2010

Top Currency ETFs For 2010, For Short Term, Medium Term, and Long Term

To diversify away from the U.S. Dollar, investors today have many choices in the form of currency ETFs. There are ETFs for many different countries, as well as combos or baskets of currencies. We computed the RSI values of all currency ETFs on the market and analyzed the results on three different timeframes (short term, medium term, and long term). RSI values are very good indicators of overbought and oversold conditions.

Here are the results.

1. Short term:

ETFs are ordered by RSI7-daily. The results are of interest to those investors who look at trading periods of days (as opposed to weeks or months).

AYT (Barclays Gem Asia-8) is severely oversold. This thinly traded ETF seeks to provide investors with monthly coupons and a cash payment based on the performance of the US dollar investments in 8 currencies: CNY, IDR, INR, KRW, PHP, THB, MYR, and TWD. AYT, however has very low volume. So for someone looking for short term in and out (i.e, liquidity), it is not a good vehicle.

Next as most oversolds are JYN, FXY, JYF, all Japanese Yen. Next in line is YCL, an ultra Yen, so you get the idea.

The most non-Japanese oversold ETF is GBB, which corresponds to the Britsih Pound.

As for most overbought, the honor goes to DBV and YCS. We have written about DBV before (a wonderful guest post). YCS is an ultra short Yen, so this matches the oversold Yen funds.

2. Medium term:

In the medium term (weeks), the only oversold ETF is CYB, the Chinese Yuan, although the New Zealand dollar is not far behind.

There are no overbought currencies in this timeframe. The closest are UUP and DRR (double short Euro).

3. Long term

For long term investors (timeframes measured in months), there are no currency ETFs that are oversold or overbought. The closest to oversold is YCL (ultra long Yen).

Not surprisinly, the closest to overbought are BZF (Brazil) and FXA (Australia), definitely two currencies that were on fire in 2009.

We track all currency ETFs live here.

As always, you can receive buy and sell alerts of these currency ETFs by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Here are the currency ETF names and average trading volumes:

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