Forex Technical Analyst Trader | Sep 11, 2016 03:42AM ET
Welcome to my "Strength and Comparison" article for the coming week, the article "Ranking, Rating and Score" has also been published.
For analyzing the best pairs to trade looking from a longer term perspective the last 3 months Currency Classification can be used in support.
This was updated on 7 August 2016 and is provided here for reference purposes:
Strong: USD, JPY, NZD. The preferred range is from 6 to 8.
Average: CHF, AUD, CAD. The preferred range is from 3 to 5.
Weak: EUR, GBP. The preferred range is from 1 to 2.
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13 Weeks Currency Score Strength
The 13 Weeks Currency Strength and the 13 Weeks Average are provided here below. This data and the "3 months currency classification" are considered for deciding on the preferred range. Because it is not ideal nor desired to change the range for a currency every single week, we perform several checks to avoid this.
The Strong CurrenciesIn the month of August the USD had a weak period but it recovered in the weeks of September. The JPY had a low score of 3 in Week 36 but recovered this last week from it.
The NZD had no pullback and is the strongest currency in the last weeks. For now the classification made on August 7 remains valid and the strong currencies are back on track. Here below you can see the Weekly Currency Score Chart for the strong currencies with 6 months data as a reference.
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Currency Score Comparison
"Comparison table" and the "Ranking and Rating list"The Forex Currency Comparison Table compares each currency with its counterpart based on the Currency Score. For more information about the currency Score of this week you can read the article "Forex Ranking, Rating and Score" which is published every week together with this article.
By using the comparison table directly below you can get a view without the volatility and statistics as opposed to the "Ranking and Rating list". Only the strength of each currency against the counterparts is analyzed by using the Technical analysis charts of the 4 Time Frames that are also used for the "Ranking and Rating List".
The information from the Comparison Table is the source for calculating the "Ranking and Rating List" where this list uses additionally the volatility and statistics for creating the best and worst performer in the list from number 1 to 28.
"Comparison table" and the "Currency Score Chart"The additional analysis of this table compared to the Currency Score table is that the Comparison Table compares the strength between the currencies of each pair. By subtracting the strength of the weaker currency from the stronger currency we have a way to compare each pair combination.
The comparison table provides a way to compare currencies from a longer term perspective of 13 weeks and also simultaneously taking the current trend into account. By coloring the currencies in the X and Y axis according to their Classification we can show what the best combinations are. In doing this we apply 2 rules to make it clear.
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Putting the pieces together
Based on the last "3 months currency classification" and the "Currency Comparison Table" the most interesting currencies for going long seem to be the:
NZD, JPY and the USD.
These are strong or average currencies from a longer term perspective when looking at the last "3 months currency classification".
For going short the same analysis can be done and the following currencies seem to fit best:
CAD, AUD, GBP and the CHF.
These are weak or average currencies from a longer term perspective.
Currencies with a high deviation seem less interesting to trade because they are less predictable. There is only one currency at the moment, which is the:
EUR.
Unless this currency offers a clear opportunity based on the longer term it is avoided. However, this currency may offer opportunities for the short term trader.
Some of these pairs comply for a longer term trade based on the Technical Analysis (TA) of the Daily and Weekly chart. We will look at these ones here in a bit more detail.
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The article "Ranking, Rating and Score" published this weekend contains the following interesting pairs as example combinations:
The pairs mentioned in the "Ranking, Rating and Score" have the preference according to:
The pairs mentioned here above are just a few examples and many other combinations are possible.
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Besides this article I also use the Forex "Ranking, Rating and Score" which is also available once a week on my blog at FxTaTrader.com . In the article "Ranking, Rating and Score" we look in more detail at the absolute position of the currencies and pairs.
It is recommended to read the page Models in practice for a better understanding of the article. 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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