As you know, every week, Splendid Exchange looks at seven major currency pairs in search of the evidence of popular delusions and the madness how to do forex calculations crowds. The idea is to find anomalies and bullish or bearish divergences that will break the trend, not prolong it. It is a painful exercise, but also highly rewarding.

In order to find the most overbought and oversold currency, I conduct four econometric studies: over-extension analysis, secular performance analysis, oil correlation and economic divergence. Additionally, I look at traders’ positioning to understand the psychological state of the market. Latest Results Recently, I decided to expand the coverage of currencies. The main focus is still on the majors, but I will also briefly look at 18 other currencies.