A comprehensive look at the efficacy of technical trading rules applied to cross-rates

Moving average (MA) and channel rules (CH) are applied to ten spot cross-rates - AUD/JPY,GBP/JPY,CAD/JPY,DEM/GBP,DEM/ITL,DEM/JPY,DEM/CHF,CHF/GBP, and CHF/JPY - to examine whether opportunities for profitable trading exist. The results suggest that neither trasding rule is profitable. Overall, the results are consistent with those reported in Lee and Mathur**and in sharp contrast with the evidence from studies on dollar-denominated exchange rates. The costs of direct currency exchange through cross-rates and through indirect dollar-related transactions are also estimated. The savings related to direct cross-rate currency exchanges are estimated to range from 0.004% to 0.22%.