Specifically, when the 20-day simple moving average of the EUR/USD exchange rate dips below its 130-day simple moving average for five consecutive business days, the index will track the hedged version of the underlying index – a stronger USD or weaker EUR means a fully hedged position.
On the other hand,if the 20-day simple moving average of the EUR/USD exchange rate is above its 130-day simple moving average for five consecutive days, the index will track an unhedged version of the underlying index – a weak USD or strong EUR triggers an unhedged position.
The strategy is rebalanced on a monthly basis.
On Thursday, the euro currency surged against the greenback after European Central Bank President Mario Draghi indicated that the central bank would hold of on further interest rate cuts. [Euro ETF Surges as ECB’s Draghi Triggers Volatility]