Weekly Currency Score, Week 21
Forex Technical Analyst Trader | May 17, 2015 01:06AM ET
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 19. The currencies are classified for the coming weeks as follows:
- Strong: USD / CHF / NZD. The preferred range is from 6 to 8.
- Average: GBP / CAD. The preferred range is from 4 to 5.
- Weak: EUR / JPY / AUD. The preferred range is from 1 to 3.
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 the following deviations:
- The NZD has a score of 2. This is a strong currency and it should have by preference a score of 6 or higher. It has a score at the moment of a weak currency.
- The USD has a score of 3. This is a strong currency and it should have by preference a score of 6 or higher. It has a score at the moment of a weak currency.
- The GBP has a score of 7. This is an average currency and it should have by preference a score from 4 to 5. It has a score at the moment of a strong currency.
- The EUR has a score of 6. 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 a strong currency.
- The AUD has a score of 4. 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 conclusion is:
- Most currencies are not at the right level when looking at the last 3 months currency classification. Only the CHF, CAD and JPY are at the right level.
- There is a strong pullback at the moment for the NZD, USD and the EUR 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 GBP that is getting stronger.
- The pairs that we may look at are all most probably trending, except for the pairs with the NZD, USD and EUR, 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:
- CHF/JPY with the GBP/AUD
- GBP/JPY with the AUD/CHF
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 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 CHF/JPY is in an uptrend and within the Bollinger Band.
- The GBP/AUD is in an uptrend and within the Bollinger Band.
- The GBP/JPY is in an uptrend and slightly outside the Bollinger Band. A light pullback will bring the pair inside the Bollinger Band.
- The AUD/CHF is in a downtrend and within the Bollinger Band.
Last week (pending) orders were placed for the CHF/JPY. This pair is still 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.
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 and don't forget to check my weekly Forex "Strategy Review" and the "Ranking and Rating list".
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