The moving average crossover rule
A)is a fundamental approach to forecasting exchange rates.
B)states that a crossover of the short-term moving average above the long-term moving average signals that the foreign currency is appreciating.
C)states that a crossover of the short-term moving average above the long-term moving average signals that the foreign currency is depreciating.
D)none of the options

Question

Quizplus · Accepted Answer

The moving average crossover rule is a technical analysis tool used to identify trend changes. It states that when the short-term moving average (e.g. 50-day) crosses above the long-term moving average (e.g. 200-day), it signals a bullish trend and potential appreciation of the foreign currency. Conversely, when the short-term moving average crosses below the long-term moving average, it signals a bearish trend and potential depreciation of the foreign currency. Therefore, answer B is the correct choice.

The Moving Average Crossover Rule