Emalbans Fx - Weekly views.
The difference between success and failure in Forex trading is very likely to depend upon which currency pairs you choose to trade each week, and not on the exact trading methods you might use to determine trade entries and exits. Each week I am going to analyze fundamentals, sentiment and technical positions in order to determine which currency pairs are most likely to produce the easiest and most profitable trading opportunities over the next week. In some cases it will be trading the trend. In other cases it will be trading support and resistance levels during more ranging markets.
Big Picture 22nd November 2015
Last week I highlighted long USD/CHF as a good trade. The pair closed the week up 1.2% from its open.
This week I have no hesitation in saying that the best opportunities are likely to be following momentum, as we now have one currency that is clearly strong and two or three others that are clearly weak. Looking to long the strong currency against the weaker currencies is probably going to be a good strategy.
Fundamental Analysis & Market Sentiment
The strong currency is the USD. The fundamental data could be stronger, however there have been no bad surprises. The position technically for the USD also looks strong. The currency is now trading higher than it was 3 months ago against every major global currency, with the exception of the JPY.
Weaker currencies are a little less clear but there are three that stand out: the CHF, GBP, EUR. Let’s take each currency in turn.
Swiss fundamentals are neutral. However there is a feeling that the “real” Swiss economy has been in trouble for a while, and the SNB wants to see the CHF fall in value to make Swiss exports more competitive. One tool to achieve this was setting a negative interest rate of 0.75%. This negative rate combines with the gloomy economic sentiment to produce a currency that feels weak.
British fundamentals are neutral. However the Bank of England has revised its forecasts downwards. Last week’s retail sales data was poor. It seems the currency is not going to be rising, so sentiment is fairly bearish here.
Eurozone fundamentals are slightly negative, with most data coming in below expectations lately. The ECB recently announced an extension of its QE program and the market has bearish sentiment here without a doubt, which can only be exacerbated by the current terror alert and increasing focus on the migrant inflow into Europe.
This suggests that the weakest currency is probably the EUR, although the CHF and GBP are quite well correlated with the EUR so they are also good candidates, as well as looking fairly weak in their own right. It would seem that if you must pick one, it would be the EUR, but I am more comfortable looking at all 3 equally, possibly giving more weight to the EUR.
