Long EUR/USD & GBP/USD

In my weekly forecast “pairs in focus” piece yesterday, in which I review the prospects for the coming week in the markets, I’d highlighted possible long trades in EUR/USD and GBP/USD and this is the way the market looks to be moving today, with a nicely “directional” London session moving against the U.S. Dollar.

Friday saw the release of disappointing U.S. economic data and bearish sentiment on the greenback seems to have followed through.

Funnily enough, this week has a relatively empty news schedule, with little of high importance on the menu. Although volatility was extremely low last week, sometimes these “empty” periods can be good times to trade, as there is little to disturb the market, and so momentum and support / resistance levels can be very predictable.

During the late Asian session, it had looked as though it was the GBP/USD which was going to make the stronger upwards movement, and although that pair has risen since London opened, the EUR/USD pair has risen more strongly. Although its often tempting to pick the “best” currency pair when two or more pairs are highly positively correlated (as the EUR/USD and GBP/USD pairs are), its usually a better idea to try to split the risk up a little, and today is an example of how it would have been better to get long in both these pairs instead of focusing on only one of them.

As it happens, the major event in the market today is the strong rise in the price of Crude Oil, and this has pushed the USD/CAD currency pair down by more than either the EUR/USD or GBP/USD, but these more major pairs tend to be much more predictable than USD/CAD, and it is better to sacrifice volatility for predictability, and not the other way around!

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Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.