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 10th January 2016
Last week I highlighted short GBP/USD as the probable best trade of the week. This worked out well as this pair fell by 1.47%. I also highlighted long USD and short CHF, EUR, and CAD as all having good potential, and taken together, these trades would have produced a nicely positive result.
This week I see the best opportunities as short GBP/USD and long USD/CAD. Both pairs are in strong long USD trends and both have made new multi-year prices this week. I also short USD/JPY as still having some potential.
I was also right in forecasting that this week would be likely to see strong money flows and volatile markets with lots of movement. This coming week is likely to be quieter.
Fundamental Analysis & Market Sentiment
The strong currency is the USD. The fundamental data could be stronger, however there have been no bad surprises and we now seem to be set on a course by the Federal Reserve of gradual rate rises. The position technically for the USD also looks quite strong. The currency is now trading higher than it was 6 months ago against every major global currency except the JPY.
Weaker currencies are a little less clear but there are two that stand out: the CAD and the GBP.
Canadian fundamentals are poor and the price of oil, with which the currency is very highly positively correlated, has fallen to new multi-year lows. Although there has been something of a recovery in recent economic data releases, the economic picture going forward is far from rosy. The Bank of Canada recently stated that it would theoretically consider negative real interest rates should another financial crisis arise, which probably contributed to the latest round of weakening of the currency.
