From the December 2013 issue of Futures Magazine • Subscribe!

The Foreign Exchange Matrix

The Foreign Exchange Matrix, a New Framework for Understanding Currency Movements
By Barbara Rockefeller and Vicki Schmelzer

Harriman House
$35.00,  276 Pages

This book attempts to unveil the mystery of the world’s foreign exchange markets whose participants essentially take a huge yet informed bet on whether a currency will rise or fall and net them a profit or a loss. The authors, Barbara Rockefeller and Vicki Schmelzer, pull back the curtain on the often opaque, yet fascinating, world of forex trading; and in 12 chapters capture the complexities of a $4 trillion a day market. 

The book describes the forex matrix as a grid format of the many factors and players in the market and why they interact. The term matrix is borrowed from random matrix theory where the math is truly advanced.

The authors explain why the forex market exists and why this form of free-booting capitalism can operate independently from the political, economic and social zeitgeist of the day. Their insights show how forex traders dislike central bank intervention, an ubiquitous and regular fact of life in the current financial milieu, and why central banks apart, forex works independently of equities, commodities, bonds and other financial trading instruments.

However, the book is peppered with references to the pivotal role the world’s central banks have in the market, especially since the subprime and euro zone crisis of 2008-2009. Their practice of quantitative easing (QE) to keep interests very low and their use of unconventional measures have spooked a Forex market that traditionally dislikes intervention and capital controls. 

Rockefeller, an international economist, and Schmelzer, a former forex professional turned financial journalist, harness their combined 50-year experience in Forex markets to track, for example, commodity futures, hedging, the dollar as a reserve currency, the relationship between the dollar and oil, and the dollar and gold. The authors also highlight why chart reading and technical analysis heavily influence Forex.

“Anyone with bias against technical analysis will not fare well in forex,” they say.

In their introduction the authors caution they are writing for a reader with a high level of knowledge of financial markets generally and a particular curiosity about the forex market. 

The authors delve into what traders pay attention to, including risk aversion, relative interest rates and relative inflation expectations, forex forecasting and the efforts of the U.S. Federal Reserve system to regulate the market. While traders may pay lip service to some outside influences, they do pay attention to the weekly Commitment of Traders report from the Commodity Futures Trading Commission.

In a market swamped with computer data Rockefeller and Schmelzer seek to untangle the web of algorithmic driven data and expose questionable or unknown ways this information is transmitted.  

Each of the 12 chapters begin with an aphorism such as one by Winston Churchill who once told the House of Commons, “There is no sphere of human thought in which it is easier to show superficial cleverness and the appearance of superior wisdom than in discussing questions of currency and exchange.” 

Agree or disagree with Churchill, forex traders must carry in their heads a mix of economic data if they want to truly follow forex and discover why prices are moving. Each country has 10 variables a trader will need to follow.  Foreign exchange exposure to hedging is 80% whereas global equities markets hedge less than 20%. Forex is a very big deal.

(An e-book edition is available free to print edition buyers. Go to

Patrick Kelly is a freelance writer with a background in commodity market reporting.

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