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: May 14Â
Last week, I predicted that the best trade for this week was likely to be long the British Pound and Euro, and short of Silver. This combination trade was unfortunately unprofitable from every angle, with EUR/USD falling by 0.61%, the GBP/USD currency pair falling by 0.73%, and spot Silver in USD terms rising by 0.75%, producing an overall average loss of 0.70%.
The Forex market is in an uncertain mood, with no real clear and obvious trends, or strong sentiment in favor of or against any currency.
The greenback has a slight bearish bias, with the British Pound and Euro both established in long-term bullish trends, although these are not necessarily strong trends. Therefore, I suggest that the best trades of the coming week will be long the British Pound and Euro, and short of the U.S. Dollar.
Fundamental Analysis & Market Sentiment
The major elements affecting market sentiment this week are likely to be the poorer than expected U.S. economic data released at the end of last week, plus a renewal of geopolitical tension following North Korea’s successful missile test over the weekend. It is difficult to forecast what the net effect is going to be. The Forex market is in an uncertain state and this week may be an appropriate time to stay on the sidelines.
Technical Analysis
USDX
The U.S. Dollar printed a bullish candle this week. It is an averaged-size candle rejecting a broken resistant trend line. The bullish trend line is broken. The price is lingering within an area I had identified as supportive, shown by the blue line in the chart below. The price is still below its level from 3 months back, but above its level of 6 months, so has no long-term trend. The signs are more bullish, but it would not be a surprise if the recent move up fails here, at least for a short while. Alternatively, a break below 12203 could trigger a sharp fall in the greenback and a more decisively bearish outlook. The price is trapped between support and resistance, but showing more signs of rising rather than falling.
