Many past studies have found that currencies trend, so technical trading rules
produced statistically and economically significant profits. In other words,
foreign exchange markets were weak-form inefficient. The study reported here
reexamined this phenomenon with use of a new database of currency futures for
1975–2006 that includes old and newly liquid currencies. The findings from
the recent data are contradictory. The profitability of trend following eroded
for major currencies and their associated cross exchange rates around the
mid-1990s. Newly liquid currencies after 2000 do trend, however, just as major
currencies did in earlier years. The evidence is consistent with early weak-form
inefficiency followed by vanishing trends as traders learn and adapt their
strategies.