The moving average crossover rule

Question

Quizplus · Accepted Answer

The moving average crossover rule is a technical analysis approach to determine changes in the trend of the exchange rate. It states that when the short-term moving average (such as 50-day) crosses above the long-term moving average (such as 200-day), it indicates that the foreign currency is appreciating and the trend is bullish. Conversely, when the short-term moving average crosses below the long-term moving average, it signals that the currency is depreciating, and the trend is bearish. Therefore, option B is the correct answer. Option A is incorrect because the moving average crossover rule is a technical rather than a fundamental analysis technique. Option C is incorrect because it has the opposite relationship between the two moving averages than what is correct. Option D is incorrect because option B is the correct answer.

The Moving Average Crossover Rule