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 19th June 2016
Last week I wrote a prediction that the best trades for this week were likely to be short USD against the JPY, Gold and Silver. This turned out to be an excellent forecast, as all three of these pairs produced a positive result: USD/JPY 2.65%, Gold 1.87%, Silver 0.82%. The average result was a gain of 1.78%.
The focus of the market has been nicely re-established onto the USD with the FOMC statement suggesting that most of the committee are not looking to try to raise rates until towards the end of 2016. This gives a more dovish outlook overall and is also in line with the long-term trend of a weakening USD, so sentiment and macro are aligned.
This week therefore looks as if we can stick with short USD, the question is what is strong. I see strength in Gold, JPY, CAD and CHF.
Fundamental Analysis & Market Sentiment
Fundamental analysis has become more useful in the Forex market now as the USD is seriously weakened by a data-driven central bank being driven away from a previously anticipated rate hike by very poor economic data. Sentiment is also pointing in the same direction.
The Japanese Yen has again been the strongest currency this week. These days it has a status as a safe haven currency.
Gold undoubtedly remains strong although it so far has proven unable to decisively break the key resistance at $1300 and the advance could halt here, at least for a while. Silver faces a similar problem, but looks weaker. There is no doubt that there is a sentiment of safety that is benefiting precious metals, however risk assets are also rising so the picture does not appear to be so clear cut.
