Forex Currency Score: Week Of December 28, 2014
Forex Technical Analyst Trader | Dec 28, 2014 03:11AM ET
The Currency Score analysis is one of the parameters used for the Ranking and Rating List which was published already this weekend. Besides this chart I also provide my weekly analysis on my strategy and the forex Ranking and Rating List which is available 3 times a week on this blog.
The favorite pairs in the Top 10 of this list are being analyzed in more detail here. This article will provide my analysis and the FxTaTrader Currency Score chart which is my view 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 The calculation of the Currency Score difference will not be published.
- The classification of the currencies from a longer term perspective are provided at the bottom of this article for reference purposes.
- There are a lot of changes this week as can be seen in the screenshot.
- The USD, NZDand the GBPare currently the stronger currencies. The JPY, AUDand the EURare the weaker currencies. The best pairs to look at are combinations of those currencies.
- Currencies with a score of 4 and 5 - this week the CHF and the CAD- are difficult to trade because they are in the middle of the range. Being in the middle of the range means the currency has no clear direction when looking at the whole market and it can easily go in any direction at any time. It is better to have a currency with some momentum in a certain direction because it is then clear how to trade this currency.
- Conclusion for going long is that for the coming week it seems best to go long with the USD, NZD and the GBP. However the NZD is an average performer from a longer term perspective so it is not preferred unless the currency score difference is significant ( >3).
- For the weaker currencies the conclusion is that for the coming week it seems best to go short with the JPY, AUD and the EUR. These are also weaker currencies from a longer term perspective and are therefore preferred to be traded short .
The fact that the CHF and the CAD are in the middle of the range is something to keep in mind. Also, some currencies have a different classification from a longer term perspective which differs from the currency score of the week and this is something to keep in mind too.
There are some rules for taking positions according to the FxTaTrader Hybrid Grid Strategy. The strategy can open multiple positions of a currency pair but each currency may only be present once in the pairs chosen for trading in the same direction. It means that not all the possible positions for this coming week can be opened..
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Another rule is that a pair outside the Bollinger Band in the Weekly Chart is considered overbought/oversold. No positions are taken for these pairs until they are no longer overbought/oversold.
Depending on the opportunities that may come up the decision to trade a currency may become more obvious at that moment.
Last week no orders were placed because of lower liquidity in the coming period. Because of lower liquidity in the coming week no positions will be opened again because prices act different during periods of lower liquidity and it is not worth the risk. Keeping your balance stable may be the best strategy during these periods. What you don't lose does not need to be earned back again! Meaning that every winning trade that will be opened at a later date is then profit rather than loss compensation.
Last 3 months currency classification
All preferred combinations comply to the guidelines that define what type of currency, (strong/average/weak,) can be traded against the other. These are classifications from a longer term perspective where 3 months is being used as a reference. The currencies are classified for the coming week as follows:
- Strong: USD / GBP / CHF
- Average: NZD/CAD
- Weak: JPY / EUR / AUD
The CHF may become an average performing currency if it does not pick up strength in the coming weeks.
The NZD may become a stronger currency if it remains strong in the coming weeks.
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