Forex Strength And Comparison For Week 39
Forex Technical Analyst Trader | Sep 25, 2016 04:41AM ET
Welcome to my "Strength and Comparison" article for the coming week. The article "Ranking, Rating and Score" has also been published. When looking at the Currency Strength in the table below, we can see that the CAD lost a lot of strength in the last 3 weeks. The CHF and the AUD became stronger in the last week, and the NZD weaker.
13 Weeks Currency Score Strength
The 13 weeks currency strength and the 13 weeks average are provided here below. This data and the "13 weeks 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.
- First of all, the strength over a period of 13 weeks. See each row for more information.
- Then the 13 weeks average, see the last row called "Avg. 13 wks."
- The number of weeks that a currency is stronger than another currency can also be evaluated.
- The TA Charts for each time frame can also be consulted.
For analyzing the best pairs to trade, looking from a longer term perspective, the last 13 weeks currency classification can be used in support.
This was updated on 25 September 2016, and is provided here for reference purposes:
Strong: USD, JPY, NZD. The preferred range is from 6 to 8.
Average: CHF, AUD. The preferred range is from 4 to 5.
Weak: EUR, GBP, CAD. The preferred range is from 1 to 3.
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The Weak Currencies
In the last weeks, the CAD became a lot weaker. According to the currency strength table here above the Avg. 13 weeks of the CAD is lower than the EUR which is a weak currency. The CAD scored also 7 times lower than the EUR in the last 13 weeks. For these reasons, the classification of the CAD has changed from average to weak.
The GBP is clearly still the weakest currency with the lowest score of 1.
Here below you can see the weekly currency score chart for the weak 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 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 additionally uses 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 value 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, while 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 clearer.
- First of all, only better classified currencies, in combination with weaker classified currencies, are "approved" when there is a currency score difference of at least 1 in the current week.
- The only exception is when 2 currencies are similarly classified but the currency score difference is equal to or more than 4.
- It means that each currency should be as far apart from each other as possible, in the range from 1 to 8. The classification of the currencies in question may change in the longer term. By using the difference of 4, which is exactly half of the range, it seems a safe approach for trading 2 currencies which are similarly classified.
- Even though currencies may be in the same classification, a currency may be in a weaker/stronger period, and may even change its classification in the future. See the current classification for the coming period at the beginning of this article.
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Putting the pieces together
Based on the last "13 weeks currency classification" and the "currency comparison table" the most interesting currencies for going long seem to be the:
JPY, CHF and AUD.
These are strong or average currencies from a longer term perspective when looking at the last "13 weeks currency classification".
For going short the same analysis can be done and the following currencies seem to fit best:
GBP and CAD.
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:
CHF and NZD.
Unless this currency offers a clear opportunity, then based on the longer term, it seems best to be avoided. However, this currency may offer opportunities for the short term trader.
Some of the pairs in the "currency comparison table" comply for a longer term trade, based on the technical analysis (TA) of the daily and weekly chart. For the coming week these seem to be:
GBP/JPY, GBP/CHF, CAD/JPY, GBP/AUD, GBP/USD, EUR/JPY, AUD/CAD and GBP/NZD
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