The Week's Forex Analysis
Forex Technical Analyst Trader | Nov 16, 2014 12:32AM ET
The Currency Score analysis is one of the parameters used for the Ranking and Rating list which was published already this weekend. 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 interesting pairs also discussed in the Forex Ranking and Rating list of this weekend are:
- The EUR/NZD which is a weaker currency against an average performing currency with a currency score difference of (3-8=) -5. Looking at the short term the NZD is even a stronger currency.
- The GBP/USD which has become currently a weak currency against a stronger currency with a currency score difference of (2-7=) -5. Looking at the longer term the GBP is a stronger currency like the USD, however it is currently in a dip. The preference goes to trade when the currency score difference is significant and that is the case.
- The EUR/USD which is a weaker currency against a stronger currency with a currency score difference of (3-7=) -4.
- The NZD, USD, CHF, AUD, CAD against the JPY on pull back in the Weekly chart below the Upper Bollinger Band. These are all strong and average performing currencies against the weakest currency JPY with a score of 1.
- The GBP/NZD looks interesting but based on a longer term perspective the GBP is the stronger currency so the preference goes to trade the GBP only against another stronger currency from a longer term perspective, in this case the USD.
All preferred combinations comply to the guide lines which define what type of currency, strong/average/weak, can be traded against the other. Besides this the currency score difference is significant for these pairs and they support this view. For more information continue reading this article.
The TA charts for the GBP/USD confirms a short position together with the currency score difference so this has more weight than the longer term perspective of the Currency Score. It is unknown for how long the GBP will have a low performing currency score. If it takes too long and it does not recover then the GBP may become an average performing currency. This is the way to trade a pair like this because the change in calssification may take a while and at the same time the TA charts and currency score may already be pointing in that direction.
The FxTaTrader Forex Currency Score chart is meaningful data for my FxTaTrader Hybrid Grid strategy.
- There are a lot of changes this week as can be seen in the screenshot. One of the changes that can clearly be seen is the strength in the NZD, CHF and AUD. Also the current weakness in GBP is significant.
- The NZD, USD, CHF are currently the stronger currencies. The JPY, GBP and EUR are the weaker currencies. The best pairs to look at are combinations of those currencies.
- Currencies with a score of 4 and 5, meaning the CAD and the AUD 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 direction and it can easily go in the wrong direction 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 NZD, USD and CHF. However the NZD and CHF are average performers from a longer term perspective so it does not have the preference.
- For the weaker currencies the conclusion is that for the coming week it seems best to go short with the JPY, GBP and EUR. The GBP is a stronger currency from a longer term perspective so it does not have the preference to go short with unless it is traded against another stronger currency and with a significant Currency score difference.
- The best combinations for the coming week also according to the Top 10 in the Forex Ranking and Rating list and the TA charts are the NZD/JPY, USD/JPY, EUR/NZD, CHF/JPY, GBP/USD, AUD/JPY, EUR/USD and the CAD/JPY.
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This is a similar analysis conclusion as already described in this article before looking at the Currency Score in more detail. However, the fact that e.g. the CAD and AUD are in the middle of the range is something to be aware of. Also, some currencies have a different classification from a longer term perspective and this is something to be aware of. too. This makes the filtering possible of what pairs to trade the coming week.
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. It means that not all the possible positions of 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. These are in this case the JPY pairs.
Depending on the opportunities that may come up the decision to trade a currency may become more obvious at that moment.
Last week (pending) orders were placed for the EUR/GBP and the AUD/USD with loss 2x EUR/GBP and profit 1x AUD/USD.
More on this in my strategy article that will be published later today. The possible positions for coming week for the strategy will then also be described.
In the previous weeks we looked into the weaker, stronger and average performing currencies from a longer term perspective using the data of the Currency Score. We also looked into the Currency Score difference. The conclusion was briefly:
- a stronger currency can be traded against a weaker and average performing currency.
- a weaker currency against a stronger and average performing currency.
- the average performing currencies can be traded against the stronger and weaker currencies.
- only trade the average performing currencies against each other when a clear trend is being developed. The currency Score difference may support this view.
For more information the article "Currency score explained " explains in full detail how the currency score is being generated. In my previous articles various aspects have been analyzed as described above.
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