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 August 19

In my previous piece last week, I forecast that the best trades would be short EUR/USD and GBP/USD. These trades finished indifferently: while the EUR/USD rose by by 0.22% the GBP/USD fell by 0.15%, producing an average loss of 0.04%.

Last week saw a rise in the relative value of the New Zealand Dollar, and a fall in the relative value of the British Pound. However, the values involved were small, and there is not really a “flow” pattern that can be used to characterize the past week.

The major development in the Forex market last week remains instability in the value of the Turkish Lira, and the sanctions/tariffs dispute between Turkey and the U.S.A., which might even end up taking Turkey out of NATO and lead to the creation of a new anti-U.S. Dollar trade bloc. The ratings agency has lowered Turkey’s sovereign debt rating from BB- to B+ which won’t help the Lira. However, it now seems unlikely that a decline in the Lira will cause a problem for European banks and the Euro itself through contagion/exposure.

Fundamental Analysis & Market Sentiment

Fundamental analysis tends to support the U.S. Dollar, as American economic fundamentals continue to look relatively strong. However, sentiment and technical factors seemed to be working against the Dollar by the end of the week and boosting the Euro and certain commodity currencies such as the Canadian and New Zealand Dollars.