The Currency Score analysis is one of the parameters used for the Ranking and Rating list which was published already this weekend. The favorite pairs in the Top 10 of this list are being analyzed in more detail here. This article will provide my analysis and the FxTaTrader Currency Score chart which is my view 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. See for full details the page Currency score explained on my blog FxTaTrader.com.
The interesting pairs also discussed in the Forex Ranking and Rating list of this weekend are:
- USD/JPY which is a stronger currency against a weaker currency with a currency score difference of (8-1=) 7.
- AUD/USD which is an average performing currency against a strong performing currency with a currency score difference of (2-8=) -6.
- USD/CAD which is a stronger currency against an average performing currency with a currency score difference of (8-3=) 5.
- AUD/CHF which are both average performing currencies but having a significant currency score difference of (2-6=) -4.
- AUD/NZD which are both average performing currencies but having a significant currency score difference of (2-7=) -5.
- EUR/USD which is a weaker currency against a stronger currency with a currency score difference of (4-8=) -4.
All preferred combinations comply to the guidelines which define what type of currency, strong/average/weak, can be traded against the other. These are classifications from a longer term perspective where 3 months is being used as a reference. At the bottom of this article I have added the relevant currency charts for reference purposes.
Besides this, the currency score difference which is calculated weekly is significant for these pairs and they support this view. For more information continue reading this article.
The FxTaTrader Forex Currency Score chart is meaningful data for my FxTaTrader Hybrid Grid strategy. Besides this chart I also provide my weekly analysis on my strategy and the Forex ranking and rating list which is available 3 times a week on this blog.
- There are a lot of changes this week as can be seen in the screenshot. And again like last week, only the JPY remained unchanged.
- The USD, NZD and the CHF are currently the stronger currencies. The JPY, AUD and the CAD are the weaker currencies. The best pairs to look at are combinations of those currencies.
- Currencies with a score of 4 and 5, meaning the EUR and the GBP are difficult to trade because they are in the middle of the range. Being in the middle of the range means the currency has no clear direction when looking at the whole market and it can easily go in any direction at any time. It is better to have a currency with some momentum in a certain direction because it is then clear how to trade this currency.
- Conclusion for going long is that for the coming week it seems best to go long with the USD, NZD and CHF. However the NZD and CHF are average performers from a longer term perspective so it does not have the preference unless the currency score difference is significant ( >3).
- For the weaker currencies the conclusion is that for the coming week it seems best to go short with the JPY, AUD and CAD. However the AUD and CAD are average performers from a longer term perspective so it does not have the preference unless the currency score difference is significant ( >3).
The fact that e.g. the EUR and GBP are in the middle of the range is something to keep in mind. Also, some currencies have a different classification from a longer term perspective which differ from the Currency score of the week and this is something to keep in mind too. There are some rules for taking positions according to the FxTaTrader Hybrid Grid Strategy. The strategy can open multiple positions of a currency pair but each currency may only be present once in the pairs chosen for trading. It means that not all the possible positions of this coming week can be opened.
Another rule is that a pair outside the Bollinger® Band in the Weekly chart is considered overbought/oversold. No positions are taken for these pairs until they are no more overbought. These are in this case the JPY pairs. Depending on the opportunities that may come up the decision to trade a currency may become more obvious at that moment.
Last week (pending) orders were placed for the EUR/CAD and the AUD/USD with profit 1x EUR/CAD and profit 2x AUD/USD.
More on this in my strategy article that will be published also this weekend. The possible positions for coming week for the strategy will then also be described.
In the previous weeks we looked into the weaker, stronger and average performing currencies from a longer term perspective using the data of the Currency Score. We also looked into the Currency Score difference. The conclusion was in brief:
- a stronger currency can be traded against a weaker and average performing currency.
- a weaker currency can be traded against a stronger and average performing currency.
- the average performing currencies can be traded against the stronger and weaker currencies.
- only trade the average performing currencies against each other when a clear trend is being developed. The Currency Score difference may support this view.
Good luck to all and have a great trading week.
Disclosure: Although the explanation may seem simple and clear there is always risk involved. I added a disclaimer to my blog for this purpose.
Disclaimer: The article is 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.