Forex Technical Analyst Trader | May 03, 2016 01:38AM ET
Welcome to my "Strength and Comparison" article for the coming month, the article "Ranking, Rating and Score" has also been published for this month.
For analyzing the best pairs to trade looking from a longer term perspective the last 12 months Currency Classification can be used in support.
This was updated on 30 April 2016 and is provided here for reference purposes:
Strong: USD / JPY / CHF. The preferred range is from 6 to 8.
Average: GBP, NZD. The preferred range is from 4 to 5.
Weak: EUR, AUD, CAD. The preferred range is from 1 to 3.
The charts were provided in the article: "Forex Currency Score Month Classification May 2016"
12 Months Currency Score Strength for May / Created: 30 April 2016
The 12 Months Currency Strength and the 12 Months Average are provided here below. This data and the "12 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.
A switch took place in the Currency classification between the GBP and the JPY. The latter one has a higher "Avg. 12 M." score compared to the GBP.
Currency Score Comparison for Month May / Created: 30 April 2016
"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 month you can read the article "Forex Ranking, Rating and Score" which is published every month 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 3 Time Frames that are also used for the monthly "Ranking and Rating List".
The information from the Comparison Table is the source for calculating the monthly "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, whereby 1 is the best and 28 is the worst performer.
"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 12 months 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 clearer.
Putting the pieces together
Based on the last "12 months Currency Classification" and the "Currency Comparison Table" the most interesting currencies for going long seem to be the JPY, CHF and the NZD. These are strong or average currencies from a longer term perspective when looking at the last "12 months Currency Classification". For going short the same analysis can be done and the EUR, AUD and the GBP seem to fit best. These are weak or average currencies from a longer term perspective.
Some of these pairs comply for a longer term trade based on the Monthly and Weekly chart. We will look at these ones here in a bit more detail. The ones that do not comply may be more interesting for the short term. See the article "Ranking, Rating and Score" for more details.
The article "Ranking, Rating and Score" for this month contains the following interesting pairs in the Top 10:
From these pairs only the GBP/JPY and the AUD/JPY seem to be interesting according to the combinations mentioned in the crossed join here above.
However, if we compare these pairs only with the "Currency Comparison Table" they are almost all approved except for the GBP/CAD.
The Forex "12 Months Currency Strength" and the "Comparison Table" provide meaningful data for my FxTaTrader strategy. Besides this I also use the "Forex Ranking, Rating and Score" which is also available once a month on my blog at FxTaTrader.com. 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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