September Monthly Currency Score
Forex Technical Analyst Trader | Sep 01, 2015 12:34PM ET
The Currency Score analysis is one of the parameters used for the Ranking and Rating list, which was published earlier. It is recommended to read the page Currency score explained and Models in practice for a better understanding of the article. This article will provide my analysis on the 8 major currencies based on the technical analysis charts using the MACD and Ichimoku indicator on 3 time frames, the monthly, weekly and daily. The result of the technical analysis are the 2 screenshots in this article showing the Currency Score and the Currency Score Difference.
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Last 12 months currency classification
The last 12 months currency classification from a longer term perspective are provided for reference purposes. See for more information the article: Monthly Currency Score for June, where the charts are available. There are no changes since June and the currencies are classified for the coming months as follows:
- Strong: CHF / GBP / USD. The preferred range is from 6 to 8.
- Average: NZD /CAD. The preferred range is from 4 to 5.
- Weak: AUD / JPY / EUR. The preferred range is from 1 to 3.
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Currency Score for September
For analyzing the best pairs to trade, this classification is the first issue. When looking at the most recent score that is used for the coming period, we can see in the screenshot below the following deviations:
- The CHF has a score of 4. This is a strong currency and it should have by preference a score from 6 to 8. It has a score at the moment of an average currency.
- The JPY has a score of 6. This is a weak currency and it should have by preference a score from 1 to 3. It has a score at the moment of a strong currency.
- The EUR has a score of 5. This is a weak currency and it should have by preference a score from 1 or 3. It has a score at the moment of an average currency.
- The NZD has a score of 2. This is an average currency and it should have by preference a score from 4 or 5. It has a score at the moment of a weak currency.
- The CAD has a score of 3. This is an average currency and it should have by preference a score from 4 or 5. It has a score at the moment of a weak currency.
The conclusion is:
- Half of the currencies are at the right level when looking at the last 12 months currency classification.
- There is an increase of momentum for the NZD and the CAD, which are getting weaker.
- There is most probably a pullback for the CHF when looking at the market as a whole. The uptrend has lost momentum.
- There is most probably a pullback for the EUR and the JPY when looking at the market as a whole. The downtrend has lost momentum.
- The pairs that we may look at are all most probably trending, except for the pairs with the NZD and CAD, which are most probably ranging.
- The CHF, EUR and JPY may offer a good opportunity to step in. However, it is important to determine if the pair is indeed having a pullback. For that reason, it is better to see the momentum returning in the pair
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Currency Score difference for September
According to the Ranking and Rating list already published this month the following pair combinations look interesting:
- GBP/NZD with the AUD/USD
- NZD/USD with the GBP/AUD
When looking at the Currency Score Table here below for this month, we can see the currency score differences. The interesting pairs should have by preference a score difference of 4 or higher when they are similarly classified. Or the better classified pair should have a higher score than the counterpart. All the pairs mentioned above comply for trading in the coming month. The Currencies are colored Green, Orange and Red resp. by the classification they have. This way, it is easier to see what currencies should have a certain score difference.
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The technical analysis is the most important issue to consider before taking positions. The Monthly Chart is being analyzed. I prefer the Bollinger Band® for defining where a pair is in the chart. Once a pair is outside a Bollinger Band, it is in a strong trend, which can cause a strong pullback. Although this may be a good opportunity for other analysts, I avoid taking positions because of the possible unexpected strong pullback. Positions are only opened inside the Bollinger Band and this may be at the start of a possible trend or on a good pullback in an existing trend.
- The GBP/NZD is in an uptrend and outside the Bollinger Band. It seems best to wait for a pullback to see the pair back again within the Bollinger Band.
- The AUD/USD is in a downtrend and within the Bollinger Band.
- The NZD/USD is in a downtrend and slightly outside the Bollinger Band. Most likely it will be inside at the start of the new month.
- The GBP/AUD is in an uptrend and slightly outside the Bollinger Band. Most likely it will be inside at the start of the new month.
When trading according to the FxTaTrader Strategy, some rules are in place. For more information, see the page on my blog FxTaTrader Strategy. Depending on the opportunities that may come up, the decision to trade a currency may become more obvious at that moment. 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 month.
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