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 July 16
Last week, I saw the best possible trades for the coming week as long EUR/JPY and long CAD/JPY. The results here would have been very negative overall, with the EUR/JPY falling by 0.63%, and the CAD/JPY rising by 0.56%. This would have produced an overall average negative result of -0.04%.
The Forex market is now in a more settled mood, with a re-emergence of clear trends, and breakouts into multi-month or even multi-year highs on a few Forex pairs, all against the U.S. Dollar. This comes as sentiment sours on the U.S. Dollar following more dovish than expected testimony by Janet Yellen, Chair of the Federal Reserve, before Congress last week.
This week I forecast that the highest probability trades will be long of the Canadian and Australian Dollars, as well as the Euro, and short of the U.S. Dollar.
Fundamental Analysis & Market Sentiment
The major element affecting market sentiment at present is the view that almost all major central banks have now indicated they are on courses of tightening monetary policy, but with much more pessimism concerning the U.S. Dollar as the Federal Reserve has now signaled a slower pace of monetary tightening. This has left the U.S. Dollar with clear weakness in the Forex market, which was reinforced by Friday’s weak inflation data which boosted the dovish case.
The Canadian Dollar has been particularly strong this week following a quarter-point rate hike by the Bank of Canada, and there is now a strongly bullish trend in the Canadian Dollar on all time frames.
