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 September 2017
Last week, I saw the best possible trade for the coming week as long of the Euro and the British Pound, and short of the U.S. Dollar. The result was negative, as although the EUR/USD rose by 0.06%, the GBP/USD fell by 0.68%, producing an overall average loss of 0.31%.
The Forex market over the past week has been indecisive, with mixed performances that do not make clear, obvious sense. The news has been dominated by the FOMC’s relatively neutral release last week, and further Korean tensions arising towards the end of the week. British Prime Minister May’s speech at the end of the week proposing a 2-year transition period after Brexit in 2019 has left some major questions still unanswered and failed to boost the Pound significantly so far as there is still a lot of political uncertainty as to which direction any eventual deal might take.
The news agenda this week will probably be dominated by key U.S. GDP and unemployment data on Thursday, as well as any further developments which may arise concerning Korea. Germany has a general election today which is very unlikely to produce any change. A shock result would create some turbulence in the Euro.
Following the current picture, I see the highest probability trade this week as long of the British Pound, and short of the U.S. Dollar. The British Pound is in a long-term bullish trend against the U.S. Dollar.
Fundamental Analysis & Market Sentiment
Sentiment is currently mixed, with some buying halting the bearish U.S. Dollar trend, and possible safe haven flow due to the Korean tension. The major event likely to dominate the market this week will be U.S. data on GDP and Unemployment Claims which is due on Thursday. It would not be surprising if most of the U.S. Dollar currency pairs have bigger moves after this data release on Thursday than during the part of the week leading up to the release.
The market has a fairly bullish sentiment on the British Pound, which has probably been because there are signs Britain may end up making a softer Brexit than had been expected, although it is still the subject of major political struggle. Any developments on that front would be very likely to affect the British Pound.
Technical Analysis
U.S. Dollar Index
This pair printed a reasonably large near-outside bullish candlestick. This signifies indecision and possibly a deeper bullish retracement. There is a clear long-term bearish trend and the price has carved out new resistance above, while closely following a dominant bearish trend line. The resistance level at 12012 has been rejected, holding almost to the pip. However, it is increasingly noticeable that there are not any visible weekly closes below about 11750, only lower wicks of candlesticks.
GBP/USD
This is the most strongly trending of all the U.S. Dollar currency pairs, although this week closed down as a small bearish pin candlestick, despite making a new 1-year high price above 1.3600. The fact that this bearish candlestick is relatively small suggests it is only a temporary pull back, making a further rise seem likely over the coming week, with no obvious resistance levels in sight until 1.3750 and 1.3839.
Conclusion
Bullish on the GBP; bearish on the U.S. Dollar.