Forex Trading Signals from DailyFX Analysts Weekly Update

US Dollar rallies against major forex counterparts have forced significant shifts in our currency trading strategy outlook. Our DailyFX 1-week volatility index spiked significantly higher on Friday’s dollar breakouts, and we will subsequently position ourselves for more breakout trades. That said, our Trend-based FXCM Speculative Sentiment Index trading signals have performed very well as of late, and we see little reason to shift our bias from this report. Look for further price breakouts through the near term.

Forex Market Conditions Summary

US Dollar rallies against major forex counterparts have forced significant shifts in our currency trading strategy outlook. Our DailyFX 1-week volatility index spiked significantly higher on Friday’s dollar breakouts, and we will subsequently position ourselves for more breakout trades. That said, our Trend-based FXCM Speculative Sentiment Index trading signals have performed very well as of late, and we see little reason to shift our bias from this report. Look for further price breakouts through the near term.

Preferred Strategies

Our overall bias has remained weighted towards Trend trades, but we likewise feel that Breakout trades may do well in key US dollar pairs through the week ahead. SSI-based forex trades tend to do well in trend/breakout markets, but none of our discretionary trading reports are specifically designed with breakout trades in mind. Our recently-launched trading signals on DailyFX+ give forex systems-based trading signals for all those with access to DailyFX+ content. Thus we keep a keen eye to most SSI-based trading signals on DailyFX+, while we will likewise watch “Breakout” signals on our newly-launched FX trading signals service.

Discretionary Strategy Outlook

Speculative Sentiment Index Trading Signals – Our Speculative Sentiment Index trading signals have seen clear improvement as of late, as major currencies have embarked on fairly extended trends. Trading the SSI typically is most effective during strongly trending markets, and the prospect of continued price trends bodes well for these signals. Visit our Forex Trader Sentiment and Positioning Thread on the FX Forum to discuss these signals.

Picking Tops and Bottoms – This difficult-to-classify strategy has performed well as of late, and we see little reason to shift our bias away from these trades. Anecdotally, times of highly volatile ranging markets have produced poor results in these trades, while low-volatility trends will tend to improve the performance of these currency trading signals. View Jamie Saettele’s most recent Forex Trading Signal Following the Fed Rate Decision.

Pairs to Range Trade – Major currencies continue to break out of their medium term trading ranges, and we would advise against placing too much weight on range trading strategies. The typical high-risk/low-reward range trade tends to underperform in strongly trending markets.

Forex Systems Outlook

DailyFX+ System Trading Signals – Please see our most recent update for our forex system trading signals on DailyFX+.

Dynamic Carry Trade Basket – Please see our weekly report on Carry Trades for a better idea on what to expect through short-term trade: US Dollar Rally Masks a Severe Carry Breakdown

Technical Analyzer and Signals from Thomson IFR – Use own discretion to filter through IFR or Technical Analyzer signals in the week ahead.

Written by David Rodriguez, Quantitative Analyst for DailyFX.com

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