Weekly Currency Score, Week 34
Forex Technical Analyst Trader | Aug 16, 2015 01:16AM 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 is 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 classification from a longer term perspective are provided for reference purposes. There are some changes, and the new classification is provided here with the necessary charts which can be found at the bottom of this article. The currencies are classified for the coming weeks as follows:
- Strong: GBP / USD / CHF. The preferred range is from 6 to 8.
- Average: EUR / JPY. The preferred range is from 4 to 5.
- Weak: NZD / AUD / CAD. The preferred range is from 1 to 3.
The CAD is weaker than the JPY for 7 weeks. The CAD was in that period within a range of 1 to 3 and the JPY was in the range from 4 to 5.
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 EUR 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 CHF has a score of 5. This is a strong currency and it should have by preference a score from 6 or 8. It has a score at the moment of an average currency.
The conclusion is:
- Most currencies are at the right level when looking at the last 3 months currency classification. The EUR and the CHF are not at the right level.
- There is an increase of momentum for the EUR that is getting stronger.
- There is a pullback for the CHF when looking at the market as a whole.
- The pairs that we may look at are all most probably trending, except for the pairs with the CHF, 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:
- GBP/NZD with the USD/CAD
- GBP/AUD with the NZD/USD
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 GBP/NZD is in an uptrend and within the Bollinger Band.
- The USD/CAD is in an uptrend and within the Bollinger Band.
- The GBP/AUD is in an uptrend and within the Bollinger Band.
- The NZD/USD is in a downtrend and within the Bollinger Band.
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.
Last 3 months currency classification charts
Here below are the charts providing the Currency classifications for reference purposes. There are three charts showing resp. the stronger, average and weaker currencies.
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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