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 November 2017
Last week, I saw the best possible trades for the coming week as long GBP/USD, short AUD/USD, and long of Crude Oil in U.S. Dollar terms. The individual results were mixed, but the overall result was extremely positive, as the GBP/USD currency pair rose by 0.94%, the AUD/USD currency pair rose by 0.62%, and Crude Oil rose by 4.13%, producing a large average gain of 1.48%.
The Forex market over the past week has continued its bearish turn on the U.S. Dollar. This was boosted by the FOMC Meeting Minutes containing more dovish language than had been expected regarding the pace of future rate hikes. The Euro was boosted by a perceived improvement in the German political and economic outlook, with a growing sense that Chancellor Merkel will eventually be able to form a new government despite the collapse in coalition negotiations. The price of Crude Oil continues to advance as nothing is happening to reduce increasing regional tension between Saudi Arabia and Iran.
The news agenda this week is almost certainly going to be dominated by some items of important U.S. economic data, mostly the new Preliminary GDP data, as well as Janet Yellen’s testimony before Congress on the U.S. economic outlook. There is also an OPEC meeting which could strongly affect the price of Crude Oil, which has had an active market lately.
The American stock market is in a strong long-term bullish trend, and it made a new all-time high price on Friday.
Following the current picture, I see the highest probability trades this week as long of the S&P 500 Index, long of Crude Oil in U.S. Dollar terms, and long of GBP/USD. These pairs are all trending, and have short-term momentum in the direction of the prevailing trends.
Fundamental Analysis & Market Sentiment
The market is largely bullish and “risk-on”, with stocks and oil looking particularly strong, while the U.S. Dollar looks weak.
U.S. Dollar Index
This index printed a large, bearish candlestick, which closed very close to its low, and there is no obvious support level below. It would not be a surprise if the price fell further, but the long-term trend has been weakening, so a period of consolidation is very possible.
S&P 500 Index
This pair is a strong long-term upwards trend, and just made a new all-time high price on Friday, which means it will probably continue to rise further. Buying stocks at all-time highs of the major index is usually a good strategy, even though the financial media is full of warnings as to how stocks are about to crash. These warnings have been coming for months; those who ignored them and bought have been rewarded. The market will probably crash eventually but meanwhile, there is money to be made on the long side. The fact that the week closed right at its high is a bullish sign.
This pair is a slow long-term upwards trend, and although the flow has a lot of deep retracements, it is clearly gradually rising. The weekly candle is a bullish candlestick which closed near its high, which is a bullish sign. The trend is persistent, but the price has still not truly cleared the very key resistance level at 1.3344. The bullish case is strengthened by the fact that the price bottomed out close to the psychologically important level of 1.3000. For these reasons, I am again bullish for the coming week.
This commodity has made another 2-year high after rising by more than 4% in value this week. Last week printed a large and very bullish candlestick, which closed right at its high with a lot of strong bullish momentum at the end of the week. The key resistance level at about 58.00 seems to have been invalidated. If the price begins to make new highs again, it looks likely to continue to rise. The advance will be helped along by any new threats being made in the middle east, if they emerge in the coming days, between the Saudi and Iranian axes. Resistance will probably begin to be felt at $62.50 at the highest.
Bullish on the S&P 500 Index, the British Pound and Crude Oil; bearish on the U.S. Dollar.