Forex Currency Score: Week 1
Forex Technical Analyst Trader | Jan 03, 2015 11:18PM ET
First of all a happy new year for everyone and a good trading year in 2015. The Currency Score analysis is one of the parameters used for the Ranking and Rating list which was published already earlier 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 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, NZD and the GBP are currently the stronger currencies. The EUR, JPY and the AUD are the weaker currencies. The best pairs to look at are combinations of those currencies.
- This week, the currencies with a score of 4 and 5 are the CAD/USD and the CHF/USD which 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 does not have the preference 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 EUR, JPY and the AUD. These are also weaker currencies from a longer term perspective and from that perspective they also have the preference to be traded short.
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The fact that e.g. the CAD and the CHF 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.
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 more 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 last period. This week I will start trading again if a good opportunity comes around.
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
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