It is also a technical indicator used in technical analysis by forex traders to chart the historical and current strength or weakness of currency pairs based on the recent trading periods. Relative currency strength is the purchasing power of a currency when traded against other foreign currencies or used to trade products. Since the currency strength of a pair can increase or decrease depending on the factors affecting such currencies, traders need to have good knowledge of what relative currency strength is and how to calculate it. In forex trading, currency strength is one of the main determinants of the value of currency pairs and can be used by short-term traders to develop news trading strategies.
Understanding the relative strength of currencies is a way to understand which pairs are bullish or bearish, confirm the pairs you want to trade, and the best time to trade a pair.
