The difference between success and failure in Forex trading is very likely to depend upon which currency pairs you choose to trade each week, and not on the exact trading methods you might use to determine trade entries and exits. Each week I am going to analyze fundamentals, sentiment and technical positions in order to determine which currency pairs are most likely to produce the easiest and most profitable trading opportunities over the next week. In some cases it will be trading the trend. In other cases it will be trading support and resistance levels during more ranging markets.
Big Picture 24th April 2016
Last week I highlighted long AUD/USD and short USD/JPY and USD/CAD as the best possible trades for this week. Unfortunately, each pair moved in the opposite direction by an average of 0.62% during this past week.
This week I see long AUD/USD and short USD/CAD as the best possible trades.
Fundamental Analysis & Market Sentiment
Fundamental analysis is becoming less useful in Forex markets at the moment.
The weakness of the U.S. Dollar is not really supported by economic data, but is rather a product of sentiment that the Federal Reserve is going to take a more cautious approach regarding any forthcoming rate rises.
The Australian Dollar also remains relatively resilient on the back of a fairly high interest rate in global terms and bullish recent economic data, even though the Reserve Bank of Australia has signaled that it does not want to see the currency move high.
The Canadian Dollar continues to strengthen on the back of the continuing recovery in the price of Crude Oil, as Canada is a major oil exporter.
Technical Analysis
USDX
The U.S. Dollar Index rose last week, printing a bullish pin bar rejecting a key support zone between 11800 and 11600. However it still closed at a price lower than the prices from both three months and six months ago, suggesting the greenback is in a downwards trend. This indicates that the best trend trades are likely to be against the U.S. Dollar in the near future. However the Index may be bouncing off the support from about 11800 to 11600 so it might be that we will see a recovery now in the U.S. Dollar which could be triggered by this week’s FOMC Minutes release.
USD/CAD
This pair has continued falling very strongly, with only one week closing up in all the previous 14 weeks. The support at 1.2750 broke last week and has been retested and acted as resistance already, although the support level at 1.2592 has held so far. Below there should be support close to the key psychological level of 1.2500.
AUD/USD
The weekly chart below shows we have just printed something of a bearish pin candle, which would suggest a downwards move next week. However we are still not far from last week’s close, which was the highest weekly close since last June, with a solid bullish breakout structure having been formed over the previous 5 weeks. Having said that, there are some dangers facing the bullish movement: the RBA has hinted strongly that it does not want the price to continue to rise, and the FOMC Meeting minutes due for release this week may encourage U.S. Dollar bulls.
