Weekly Currency Score, Week 45
Forex Technical Analyst Trader | Nov 01, 2015 05:16AM 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.
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Last 3 months currency classification
The last 3 months currency classification from a longer term perspective are provided for reference purposes. There are some changes and the new classification is provided here with the necessary charts which can be found at the bottom of this article. The currencies are classified for the coming weeks as follows:
- Strong: GBP / USD. The preferred range is from 7 to 8.
- Average: CHF / EUR / JPY / NZD. The preferred range is from 3 to 6.
- Weak: AUD / CAD. The preferred range is from 1 to 2.
The CHF was a strong currency but is very weak lately and is now classified as an average currency.
The NZD was a weak currency but is very strong lately and is now classified as an average currency.
For now the average classification contains 4 currencies, while the other classifications have only 2 currencies.
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Currency Score
For analyzing the best pairs to trade the last 3 months, currency 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 deviations and we can come to certain conclusions. These are explained below the screenshot.
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Strong currencies
- No deviations with the the strong currencies. The GBP and USD are within their range offering opportunities to be trades against the average and weak currencies.
- There are no pullbacks and any pair with momentum seems like a good opportunity.
Average currencies
- There is a deviation for the EUR with a score of 2. This is an average currency and it should have by preference a score from 3 to 6.
- There is a decrease of momentum for the EUR, which is getting weaker.
- The EUR has a score at the moment of a weak currency and it seems best to be traded going short against the strong currencies.
- There are no other deviations meaning that the other average currencies; CHF, JPY and NZD seems best to be traded, depending on the opportunities coming around,.in the following ways:
- going short against the strong currencies
- going long against the weak currencies
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Weak currencies
- There is a deviation for the CAD with a score of 4. This is a weak currency and it should have by preference a score from 1 to 2.
- There is most probably a pullback for the CAD when looking at the market as a whole, the downtrend has lost momentum.
- The CAD has a score at the moment of an average currency and it seems best to be traded going short against the strong currencies.
- There are no other deviations, meaning that the other weak currency, the AUD, seems best trading, depending on the opportunities coming around, in the following ways:
- going short against the strong currencies
- going short against the average currencies
Summary:
- The weak currencies against the EUR are most probably ranging, and there are most probably no opportunities in the Top 10 of this week "Ranking and Rating list."
- The CAD 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, check the "Ranking and Rating list." If there is momentum, then check also the"Currency score difference" table.
- All the other pairs may be in a trend when complying to the "Currency score difference" table, which can be seen here below. There are most probably opportunities in the Top 10 of this week "Ranking and Rating list."
- By using the (1)"Ranking and Rating list" with the (2)above Weekly Currency Score analysis and the (3)"Currency score difference" table with the (4)Bollinger Band® analysis provided here below a good foundation is provided for looking at the Weekly and Daily Technical analysis chart of a specific 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:
- GBP/AUD with the USD/CHF
- EUR/GBP with the AUD/USD
- GBP/CHF with the EUR/USD
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. All the pairs mentioned above 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.
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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. Trades 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 GBP/AUD is in an uptrend and within the Bollinger Band.
- The USD/CHF is in an uptrend and within the Bollinger Band.
- The EUR/GBP is in a downtrend and within the Bollinger Band.
- The AUD/USD is in a downtrend and within the Bollinger Band.
- The GBP/CHF is in an uptrend and within the Bollinger Band.
- The EUR/USD is in a downtrend and within the Bollinger Band.
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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Last 3 months currency classification charts
Here below are the charts providing the Currency classifications for reference purposes. There are three charts showing resp. the stronger, average and weaker currencies.
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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 and don't forget to check my weekly forex "Strategy Review" and the "Ranking and Rating list."
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