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 18th December 2016
Last week, I predicted that the best trades for this week were likely to be long USD against the Japanese Yen and the Swiss Franc. Both these trades were winners, averaging a strong +1.67%. The best result was long USD/JPY. The USD increased in strength notably, in line with the long-term bull trend in the greenback.
The Forex market seems to be staying in a more predictable mode now, with increased signs that the strong rally in the USD since 8th November is finding new legs.
I therefore suggest that the best trades this week are likely to be long USD against the Japanese Yen and the Euro, to spread the risk somewhat.
Fundamental Analysis & Market Sentiment
Fundamental factors are playing a role right now most notably on the USD. Last week, the FOMC raised the base rate by 0.25%, and the market was expecting that, but the surprise which made the market more bullish on the USD was the upward revision of projections for further tightening through more rate hikes during 2017 and beyond.
There are not really any other fundamental or sentimental factors to pick out this week.
Technical Analysis
USDX
The U.S. Dollar made a new 14 year high, printing a bullish candle within the scope of a wider bullish trend that is manifested over both the long and short terms. Bullish, bullish, bullish.
USD/JPY
Another strongly bullish week with a strongly bullish candle making a new high, within the context of continuing strong bullish momentum. Note that the price is at a new 10-month high level. A note of caution – the price has met an area of long-term resistance and retreated a little from there.
