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 17th September 2017
Last week, I saw the best possible trade for the coming week as long of Gold, Euro, the British Pound, and the Japanese Yen, and short of the U.S. Dollar. The result was negative overall, as the only single trade which was profitable was the British Pound: GOLD/USD fell by 1.94%, EUR/USD fell by 0.78%, GBP/USD rose by 3.00%, and USD/JPY rose by 2.78%, producing an overall average loss of 0.63%.
The Forex market over the past week has been dominated by a very strong British Pound, resulting from higher than expected inflation data which has led the Bank of England to take a more hawkish tone, making the prospect of a rate rise later this year more likely.
The news agenda this week will probably be dominated by the key monthly FOMC guidance and interest rate setting, and the Bank of Japan will also be giving their monthly guidance.
Following the current picture, I see the highest probability trade this week as long of the British Pound and the Euro, and short of the U.S. Dollar. Both the British Pound and the Euro are in long-term bullish trends against the U.S. Dollar.
Fundamental Analysis & Market Sentiment
The major sentiment dominating the market, at least at the start of this week, will be speculation on how the FOMC releases will affect the U.S. Dollar. The Bank of Japan’s releases the following day will also put the Yen, which has been volatile in recent weeks, into focus.
The market has a very bullish sentiment on the British Pound, and looks ready to keep buying it.
Technical Analysis
U.S. Dollar Index
This pair printed a reasonable large inside bearish pin candlestick. The price closed near the low of the candle, which is another bearish sign. There is a clear long-term bearish trend and the price has carved out new resistance above, while closely following a dominant bearish trend line. The resistance level at 12012 has been rejected, holding almost to the pip.
GBP/USD
This was the standout pair of the week, rising by more than 3% to reach a new 1-year high price above 1.3600. There was a very large, very strongly bullish candle closing near its high. A further rise seems likely over the coming week, with no obvious resistance levels in sight until 1.3750 and 1.3839
EUR/USD
The price fell by a moderate amount this week, but the key supportive area at 1.1838 has held. There was an average sized, slightly bearish candle closing near its center, suggesting indecision. A rise over this coming week is not highly likely, but any rise that does happen could be surprisingly strong, as there is not much resistance beyond 1.2044. A break above 1.1990 would be a notably bullish development.
Conclusion
Bullish on the GBP and Euro; bearish on the U.S. Dollar.