Weekly Currency Score, Week 42
Forex Technical Analyst Trader | Oct 11, 2015 01:36AM ET
The Currency Score analysis is one of the parameters used for the Ranking and Rating list, which was published earlier this weekend. Besides this analysis and the corresponding chart, I also provide the forex ranking and rating list.
It is recommended to read the page Currency score explained and Models in practice for a better understanding of the article. This article will provide my analysis on the 8 major currencies based on the technical analysis charts using the MACD and Ichimoku indicator on 4 time frames: the monthly, weekly, daily and 4 hours. The result of the technical analysis is the 2 screenshots in this article showing the Currency Score and the Currency Score Difference.
Last 3 months currency classification
The last 3 months currency classifications from a longer term perspective are provided for reference purposes. The necessary charts can be found in the previous article Weekly Currency Score, Week 34. The currencies are classified for the coming weeks as follows:
- Strong: GBP / USD / CHF. The preferred range is from 6 to 8.
- Average: EUR / JPY. The preferred range is from 4 to 5.
- Weak: NZD / AUD / CAD. The preferred range is from 1 to 3.
Currency Score
For analyzing the best pairs to trade, this classification is the first issue. When looking at the most recent score that is used for the coming period, we can see in the screenshot below the following deviations:
- The CHF has a score of 5. This is a strong currency and it should have by preference a score from 6 or 8. It has a score at the moment of an average currency.
- The USD has a score of 4. This is a strong currency and it should have by preference a score from 6 or 8. It has a score at the moment of an average currency.
- The GBP has a score of 2. This is a strong currency and it should have by preference a score from 6 or 8. It has a score at the moment of a weak currency.
- The EUR has a score of 7. This is an average currency and it should have by preference a score from 4 to 5. It has a score at the moment of a strong currency.
- The JPY has a score of 1. This is an average currency and it should have by preference a score from 4 to 5. It has a score at the moment of a weak currency.
- The NZD has a score of 8. This is a weak currency and it should have by preference a score from 1 to 3. It has a score at the moment of a strong currency.
- The AUD has a score of 6. This is a weak currency and it should have by preference a score from 1 to 3. It has a score at the moment of a strong currency.
The conclusion is:
- Only the CAD is at the right level when looking at the last 3 months currency classification.
- There is most probably a pullback for all the 3 strong currencies – USD, GBP and the CHF – when looking at the market as a whole. The uptrend has lost momentum.
- There is an increase of momentum for the EUR, which is getting stronger, and a decrease of momentum for the JPY, which is getting weaker.
- There is most probably a pullback for the NZD and the AUD when looking at the market as a whole. The downtrend has lost momentum.
- The pairs that we may look at are all most probably trending, except for the pairs with the JPY and the EUR, which are most probably ranging. Some pairs may be in a trend and having momentum. These can be interesting. Check the Ranking and Rating list published this weekend for more information.
- The USD, CHF, GBP, CAD and NZD may offer a good opportunity to step in. However, it is important to determine if the specific pair is indeed having a pullback. For that reason, it is good to see the momentum returning in that pair.
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Currency Score difference
According to the Ranking and Rating list already published this weekend, the following pair combinations look interesting:
- EUR/JPY with the AUD/CAD
- AUD/JPY with the EUR/CAD
When looking at the Currency Score Table here below for this week, we can see the currency score differences. The interesting pairs should have by preference a score difference of 4 or higher when they are similarly classified. Or the better classified pair should have a higher score than the counterpart. Only the EUR/JPY and the EUR/CAD comply for trading in the coming week. The Currencies are colored Green, Orange and Red resp. by the classification they have. This way it is easier to see what currencies should have a certain score difference.
The technical analysis is the most important issue to consider before taking positions. The Weekly Chart is analyzed. I prefer the Bollinger Band® for defining where a pair is in the chart. Once a pair is outside a Bollinger Band, it is in a strong trend, which can cause a strong pullback. Although this may be a good opportunity for other analysts, I avoid taking positions because of the possible unexpected strong pullback. Positions are only opened inside the Bollinger Band and this may be at the start of a possible trend or on a good pullback in an existing trend.
- The EUR/JPY is neutral. Other pairs look more interesting.
- The EUR/CAD is in an uptrend and within the Bollinger Band.
As you probably noticed, there are almost no opportunities after preparing the analysis for the coming week. Check the Monthly analysis for October, which was published last Monday, and you will see that these are very well aligned with the analyses of the previous weeks. Also, the monthly and previous weekly analysis correspond quite well with the 3 months currency classification. The result of the analysis made here for the coming week is an exception caused by the many pullbacks in the different pairs. For taking positions, I prefer to follow the Monthly analysis, which is supported through all the previous weekly analyses and through the 3 months currency classification and 12 months currency classification used for the monthly analysis itself.
When trading according to the FxTaTrader Strategy, some rules are in place. For more information, see the page on my blog FxTaTrader Strategy. Depending on the opportunities that may come up, the decision to trade a currency may become more obvious at that moment. If you would like to use this article, then mention the source by providing the URL FxTaTrader.com or the direct link to this article. Good luck in the coming week.
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