How to Measure Currency Strength
EURUSD falls half a percent. Did the euro get weaker, or did the dollar get stronger? The pair will not tell you, and the answer changes what you do in every other pair on the screen. The way to find out is to score each currency against a whole basket, which is what the Helious FX momentum scorecard does twice every trading day.
1. How do you measure currency strength?
Score each currency against the whole basket of its peers rather than against one pair. Take how far it moved against every other currency in the basket over whatever window you care about, average those moves, and that average is its strength score. A currency that gained on most of its peers comes out positive, one that lost ground comes out negative.
Strength inside a basket is zero-sum. The scores net to zero, because whatever one currency gains another one loses. If a strength tool's numbers do not net out, it is measuring something else.
2. Why is a single pair a bad measure of strength?
Because a pair carries two stories at once. A falling EURUSD can mean a weak euro, a strong dollar, or some of each, and each of those points you at a different position in GBPUSD, USDJPY and gold.
Comparing EUR to everything else settles it. If EUR is roughly flat against GBP, JPY, AUD and NZD but down against USD, the dollar did the moving, and every USD pair on the board is carrying that same move.
3. Which currencies does the Helious scorecard cover?
Seven majors: USD, EUR, GBP, JPY, CHF, AUD and NZD. Each one is scored against the average of the other six, off live market prices. On the card every currency gets a flag, a strength bar that runs either side of zero, the blended score, and the raw components sitting behind it. The live version is on the FX momentum data page, free to view and download.
4. Why blend two time horizons?
A day tells you what moved today. A week tells you whether today was part of a run. Helious blends the two, weighting the 1-day move 0.6 and the 5-day move 0.4, and prints both components beside the blend so you can see where the score came from.
Read them together. A currency spiking today on top of a flat week is reacting to news, and that kind of move often fades. One grinding higher across both windows is trending. When today runs against the week, you are looking at a mean reversion candidate.
5. How often does the scorecard update?
The card posts to the Helious terminal feed twice each weekday, at 8am ET before the US data window opens and again at 2pm ET, into the afternoon session. The data page itself keeps refreshing all through the trading day.
6. Is the data accurate?
We run the same method over the official ECB reference rates to check it lands in the same place, and it does. The same currency leads, the same one lags, and where our numbers differ from theirs the gap is about the size you would expect from the two being fixed at different times of day. The method is published in full on the data page, and the zero-sum check runs on every build.
7. What does currency strength tell a trader?
It tells you how to express a view you already hold. If you want to be long risk and the card has AUD leading while JPY lags, AUDJPY puts both legs on your side. If you want to fade a strong dollar, fade it against the strongest peer on the card, not the weakest.
The whole board also tells you which regime you are in. A strong dollar while AUD and NZD are weak is the classic risk-off tape. Turn that round, a weak dollar and a weak yen with the commodity currencies leading, and you have risk-on. Yen strengthening on its own is something else again, usually positioning being unwound or money looking for somewhere safe, and worth checking against the rates board.
8. How does strength connect to rates and data releases?
Currencies mostly follow expected interest-rate differentials, which is the gap between where traders think each central bank will end up setting rates. Those expectations move on economic data and on what central bankers say. A hot US CPI print lifts the expected Fed path and usually drags the dollar up with it, and a dovish surprise does the same thing in reverse. That is why the scorecard sits next to the economic calendar and the scored news feed instead of on its own.
9. Where can I see the scorecard?
Two places, both ours. The live scorecard is at helious.io/data/fx, along with the method behind it, an FAQ, and a sample CSV or JSON download of recent rows. For the full history you go through the API.
The same card posts into the terminal feed twice each weekday, next to the Hormuz transit monitor, the implied vol board and the cross-asset correlations.
10. Can strength scores be used for mean reversion as well as momentum?
Yes, with care. A score stretched a long way against a flat or opposing 5-day trend often snaps back, while one pointing the same way as its trend tends to keep going. Both horizons sit on the card so you can work out which of the two you are looking at before you put a trade on.
Either way, score against the basket. A pair on its own only tells you that a price moved, and the basket is what tells you which of the two currencies moved it.