The Currency Score analysis is one of the parameters used for the Ranking and Rating list which was published earlier this weekend. Besides this analysis and the corresponding chart I also provide the weekly analysis on my strategy and the Forex ranking and rating list which is available 3 times a week on this blog.
This article has been improved and brought to a higher level by the modifications made. It is recommended to read the page Currency score explained and Models in practice for a better understanding of the articles and the new changes. This article will provide my analysis on the 8 major currencies based on the technical analysis charts using the MACD and Ichimoku indicator on 4 time frames, the monthly, weekly, daily and 4 hours. The result of the technical analysis are the 2 screenshots in this article showing the Currency Score and the Currency Score Difference.
[B]Last 3 months currency classification
[/B]
The last 3 months currency classification from a longer term perspective are provided for reference purposes. See for more information the article: Weekly Currency Score Wk03 where the charts are available. The currencies are classified for the coming weeks as follows:
[ul]
[li]Strong: CHF / USD / NZD[/li][li]Average: GBP /CAD[/li][li]Weak: EUR / JPY / AUD[/li][/ul]
The GBP has developed very strong in the last weeks and may move from an average to a strong classsification.
[B]Currency Score[/B]
For analyzing the best pairs to trade this classification is the first point to start with. When looking at the most recent score that is used for the coming period we can see in the screenshot below that the NZD is having a score of 5 and the AUD a score of 4. A strong currency should have by preference a score of 6 or higher and a weak currency a score of 3 or lower. The GBP swithed places with the NZD and the CAD switched with the AUD. This is the same situation as during the previous week.
[ul]
[li]Most of the currencies are at the right level and some differ with just 1 point. However the CAD differs with 3 points being at a score of 1 while it should have at least a score of 4 being an average currency.[/li][li]There is a pullback at the moment for the AUD and the CAD.[/li][li]The pairs that we will look at are all most probably trending except for the short AUD and long CAD positions which are most probably ranging.[/li][/ul]
[B]Currency Score difference[/B]
According to the Ranking and Rating list already published this weekend the following pair combinations look interesting. The CHF is still being avoided because the daily charts are not yet good to interpret because of the heavy price movement when the EUR/CHF floor was taken away.
[ul]
[li]USD/CAD with the EUR/NZD[/li][li]GBP/CAD with the NZD/CAD[/li][li]EUR/USD with the GBP/JPY[/li][li]USD/JPY with the GBP/CAD[/li][/ul]
When looking at the Currency Score Table here below for this week we can see the currency score differences. The EUR/NZD and the GBP/JPY have a currency score lower than 4 but the EUR and the JPY have a classification of a weaker currency, the NZD is a stronger currency and the GBP an average currency getting stronger. It means that these are good pairs to trade and it means that all the pairs mentioned qualify for taking positions.
The technical analysis is the most important to consider before taking positions. The Weekly Chart is being analyzed. I prefer the Bollinger Band for defining where a pair is in the chart. Once a pair is outside a Bollinger Band it is in a strong trend which can cause a strong pullback. Although it may be for other analysts a good opportunity I avoid taking positions because of the possible unexpected strong pullback. Positions are only opened inside the Bollinger Band and this may be at the start of a possible trend or on a good pullback in an existing trend.
[ul]
[li]The USD/CAD is clearly in a trend and nicely within the Bollinger Band.[/li][li]The EUR/NZD looks like it is picking up the downtrend again and is clearly within the Bollinger Band.[/li][li]The GBP/CAD is clearly in a trend but outside the Bollinger Band. However with the new value of the Bollinger Band next week the price may be within again.[/li][li]The NZD/CAD is clearly in a trend but outside the Bollinger Band. However with the new value of the Bollinger Band next week the price may be within again.[/li][li]The EUR/USD is clearly in a trend and nicely within the Bollinger Band.[/li][li]The GBP/JPY looks like picking up the uptrend and is clearly within the Bollinger Band.[/li][li]The USD/JPY looks like picking up the uptrend and is clearly within the Bollinger Band.[/li][/ul]
So all the pairs mentioned here are interesting for the coming week. Last week (pending) orders were placed for the EUR/NZD and the GBP/JPY. These are both still interesting for the coming week. More details on the (possible) traded pairs will be provided in my strategy article that will also be published this weekend. The possible positions for coming week for the strategy will then also be described.
When trading according to the FxTaTrader Strategy some rules are in place. For more information see the page on my blog FxTaTrader Strategy. Depending on the opportunities that may come up the decision to trade a currency may become more obvious at that moment.
[B]DISCLAIMER: [/B]The articles are my personal opinion, not recommendations, FX trading is risky and not suitable for everyone.The content is for educational purposes only and is aimed solely for the use by ‘experienced’ traders in the FOREX market as the contents are intended to be understood by professional users who are fully aware of the inherent risks in forex trading. The content is for ‘Forex Trading Journal’ purpose only. Nothing should be construed as recommendation to purchase any financial instruments. The choice and risk is always yours. Thank you.