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 12th February 2017
Last week, I predicted that the best trade for this week was likely to be long AUD and NZD and short USD. The results were as follows: AUD/USD was virtually unchanged, down -0.10%, while NZD/USD had a steeper decline, down -1.52%. The average was a loss of -0.81%.
The Forex market seems to be staying in a less predictable mode now, although there are signs that the well-established bullish trend in the USD since 8th November is beginning to reassert itself. It is still technically intact.
A few major currencies are now starting to move into long-term bullish territory against the U.S. Dollar, most notably the Australian Dollar. Therefore, I suggest that the best trade of the coming week will be long the Australian Dollar and short of the Euro, which is the most technically bearish of all the major currencies.
Fundamental Analysis & Market Sentiment
There are few fundamental or sentimental factors driving the Forex market right now. Last week had a light flow of economic data. Perhaps the most notable exception was the Reserve Bank of Australia’s monthly statement which was quite bullish on the Australian economy and this seems to have held the Australian Dollar up. There is also renewed concern over dealings between Greece and the E.U. which is not helping the Euro, which remains bearish.
Technical Analysis
USDX
The U.S. Dollar printed a weakly bullish candle within the scope of a wider bullish trend that is manifested over the long term. Note that in the event of a further fall, the price may find support at the confluence of the supportive trend line and the horizontal level at 122186, as shown in the chart below.
AUD/USD
This week we see a bullish inside candle closing near its high, which is significant for its bullishness. This suggests a continuing upwards movement, yet it must be noted that the price has reached an area which has proved to be resistant over a lengthy multi-month period.
EUR/USD
This week we see a large bearish engulfing candle which closed near its low, suggesting continued bearishness. The long-term trend suggests a continuing downwards movement, yet it must be noted that in recent weeks we had significant buying at levels not far below the current price.
Conclusion
Bullish on the AUD, bearish on EUR.