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 26th February 2017
Last week, I predicted that the best trade for this week was likely to be long AUD/CHF. The result was a winning trade producing a gain of 0.38%.
The Forex market seems to be in a very indecisive mood with few clear trends, particularly regarding the U.S. Dollar which is usually the main engine behind major market moves.
Despite this, a few major currencies are now starting to move into long-term bullish territory against the U.S. Dollar, most notably the Australian Dollar. Therefore, I suggest that the best trade of the coming week will be long the Australian Dollar and short of the Euro, which is the most technically bearish of all the major currencies. Gold and Silver also look quite bullish against the U.S. Dollar.
Fundamental Analysis & Market Sentiment
There are few fundamental or sentimental factors driving the Forex market right now. Last week had a light flow of economic data. There were no notable stand-outs from the releases which strongly affected sentimental of fundamental outlooks.
Technical Analysis
USDX
The U.S. Dollar printed a small doji candle within the scope of a wider bullish trend that is manifested over the long term. Note that in the event of a further fall, the price may find support at the confluence of the supportive trend line and the horizontal level at 122186, as shown in the chart below. However, the price is now below its level from 3 months back, which is a sign the bullish trend is technically in heavy doubt.
AUD/USD
This week we see a small bearish pin candle, which is part of a wider pattern of repeated rejections of a resistant area above the current price. This suggests that anything might happen next, including a major bearish reversal or deep pull back, and it must be noted that the price has reached an area which has proved to be resistant over a lengthy multi-month period. Nevertheless, the price has a lot of bullish momentum and is high, which suggests higher prices still.
EUR/USD
This week we see a bearish candle, but it is notable that both this week and the previous week had large lower wicks which suggests supportive buying at the lows below. The price is below its levels of both 3 months and 6 months suggesting a bearish trend is still in force, so there are still good reasons to be bearish of this pair and the Euro in general.
SILVER
This week we see yet another consecutive bullish candle, and the price is well above its level of 3 months and is also close to exceeding its level of 6 months. For precious metals, this is usually a good indication of a technically strong bullish trend. Recent action over the past several weeks has also been strong and the indication is that the price of Silver will continue to rise. Gold is in a similar position, but Silver looks more strongly bullish.
Conclusion
Bullish on the AUD and Silver; bearish on the EUR.