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 August 12
In my previous piece last week, I forecast that the best trades would be long of the S&P 500 Index above the previous two weeks’ high price, as well as short EUR/USD and GBP/USD. These trades worked out very well: although the S&P 500 Index ended up down 0.52% from the high price, the EUR/USD fell by 1.34% and the GBP/USD fell by 1.78%, producing an average profit of 0.87%.
Last week saw a rise in the relative value of the Japanese Yen, U.S. Dollar and Swiss Franc, and a fall in the relative value of the New Zealand Dollar, British Pound, Euro and the commodity currencies. It was basically a money flow into “risk-off” assets.
The major development in the Forex market last week is the dangerous collapse in the value of the Turkish Lira, and the sanctions/tariffs dispute between Turkey and the U.S.A., which might even end up taking Turkey out of NATO and lead to the creation of a new anti-U.S. Dollar trade bloc. This could cause a problem for European banks and the Euro itself through contagion / exposure.
The other major item last week was a dovish report from the RBNZ which strongly weakened the New Zealand Dollar.
Fundamental Analysis & Market Sentiment
Fundamental analysis tends to support the U.S. Dollar, as American economic fundamentals continue to look relatively strong. The U.S. Dollar Index ended the week at its highest level seen since May 2017. The Euro and British Pound look weak, as the collapsing Turkish Lira drags the Euro down, and as a “No Deal” Brexit becomes increasingly likely.