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 polished and brought to a higher level by the modifications implemented. 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.
Last 3 months currency classification
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:
- Strong: CHF / USD / NZD
- Average: GBP /CAD
- Weak: EUR / JPY / AUD
Currency Score
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 being used for the coming period we can see in the screenshot below that the NZD is having a score of 5 and the JPY 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 swithed with the JPY.
- Most of the currencies are at the right score and some deviate with just 1 point.
- There is no significant pullback in any of the currencies at the moment.
- The pairs that we will look at are all most probably trending.
Currency Score difference
According to the Ranking and Rating list already published this weekend the following pair combinations look interesting.
When looking at the Currency Score Table here below for this week we can see the Currency score differences. Only the EUR/GBP and the GBP/CAD are having a currency score lower than 4 but the EUR has the classification of a weaker currency and the GBP is an average currency so it is a good pair to trade. It means that all the pairs mentioned are qualified for taking positions except for the GBP/CAD.
The Technical analysis is the most important before taking positions. The Weekly chart is being analyzed. I like 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.
- The USD/CAD is clearly in a trend and is having a pullback being at the Upper Bollinger Band.
- The GBP/AUD is breaking out but is still at the Upper Bollinger Band.
- The GBP/CAD is clearly in a trend and had a pullback last week but recovered and is now too far outside the Bollinger Band.
- The AUD/USD is clearly in a trend and nicely within the Bollinger Band.
- The EUR/GBP is clearly in a trend but outside the Bollinger Band. However a small pullback may correct this in the coming week.
- The EUR/USD is clearly in a trend and nicely within the Bollinger Band.
So only the GBP/CAD is not interesting and there are 5 interesting pairs remaining for the coming week. Last week (pending) orders were placed for the EUR/GBP and the AUD/USD. 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.
DISCLAIMER: 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.