Weekly Currency Score: Week 16
Forex Technical Analyst Trader | Apr 12, 2015 03:27AM ET
The Currency Score analysis is one of the parameters used for the Ranking and Rating list which was published earlier this weekend. Besides this analysis and the corresponding chart I also provide the weekly analysis on my strategy and the Forex ranking and rating list which is available 3 times a week on this blog.
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 4 time frames, the monthly, weekly, daily and 4 hours. The result of the technical analysis are the 2 screenshots in this article showing the Currency Score and the Currency Score Difference.
Last 3 months currency classification
The last 3 months currency classifications from a longer term perspective are provided for reference purposes. The necessary charts can be found in the previous article Weekly Currency Score Week 11. The currencies are classified for the coming weeks as follows:
- Strong: USD / NZD / GBP. The preferred range is from 6 to 8.
- Average: CAD / CHF / JPY. The preferred range is from 3 to 5.
- Weak: EUR / AUD. The preferred range is from 1 to 2.
Currency Score
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 that the CAD is having a score of 6, the GBP a score of 2 and the AUD a score of 3. A strong currency (GBP) should have by preference a score of 6 or higher and an average currency (CAD) a score from 3 to 5. The AUD is having a score of 3 while it is a weak currency, it is 1 point higher than the preferred range.
The conclusion is:
- Most of the currencies are at the right level except for the the GBP, CAD and AUD.
- There is a strong pullback at the moment for the GBP when looking at the market as a whole.
- There is a light pullback for the AUD when looking at the market as a whole.
- There is an increase of momentum for the CAD which is getting stronger.
- The pairs that we may look at are all most probably trending except for the pairs with the GBP and AUD which are most probably ranging.
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Currency Score difference
According to the Ranking and Rating list already published this weekend the following pair combinations look interesting.
- EUR/USD with the GBP/NZD
- GBP/USD with the EUR/CAD
- EUR/NZD with the GBP/USD
- EUR/CAD with the GBP/NZD
When looking at the Currency Score Table here below for this week 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 week. 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.
The technical analysis is the most important issue to consider before taking positions. The Weekly 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 EUR/USD is in a downtrend and within the Bollinger Band.
- The GBP/NZD is in short term downtrend and in a weak longer term downtrend and within the Bollinger Band.
- The GBP/USD is in a downtrend and at the Bollinger Band.
- The EUR/CAD is in a downtrend and slightly outside the Bollinger Band. This will most probably not be the case when the trading week starts and the new indicator values are calculated.
- The EUR/NZD is in a downtrend and within the Bollinger Band.
So all the pairs mentioned here are interesting for the coming week. Last week (pending) orders were placed for the EUR/NZD and the AUD/CHF. The EUR/NZD remains interesting for the coming week. More details on the (possible) traded pairs will be provided in my strategy article that will also be published this weekend. The possible positions for coming week for the strategy will then also be described.
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.
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