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 22nd May 2016
Last week I highlighted short GBP/USD as the best possible trade. This pair actually rose by 1.01% during this past week.
This week is again a difficult prediction as sentiment is currently mostly against all the long-term trends. For this reason I refrain from making any particular prediction.
Fundamental Analysis & Market Sentiment
Fundamental analysis is becoming less useful in Forex markets at the moment. Sentiment has been much more of a driver.
The U.S. Dollar has been the strongest currency this week, moving against its longer-term trend of weakness. Sentiment has turned bullish on the U.S. Dollar as last week’s FOMC Meeting Minutes release seems to show that members of the Fed are highly keen to implement another rate hike next month.
The British Pound has benefited to some extent following the publication of a new opinion poll which suggests that there will be a comfortable victory for “remain” in next month’s referendum on British membership of the European Union.
Technical Analysis
USDX
The U.S. Dollar Index rose again last week, printing a fairly bullish candle as part of a movement rejecting into a key support zone between 11800 and 11600. However, it again closed at a price lower than the prices from both three months and six months ago, indicating the greenback remains in a downwards trend. Nevertheless the chart suggests some continuing short-term strength in the U.S. Dollar.
USD/CHF
Looking at the major pairs, probably the best one for exploiting any continuation of U.S. Dollar strength would be the USD/CHF pair. This is mainly because the price has just closed above its price from 3 months ago, which is often a good indication of a trend change. Additionally, the CHF has a strongly negative rate of interest, which tends naturally to weaken the currency, while the USD is expected to shortly increase its interest rate to more than the current 0.50%.
The chart below suggests a break above 0.9913 would be likely to see ma move up to at least 1.0000.
