Forex Strength and Comparison Week 32 / 2017: By FXTA Trader

In the Currency Strength table, the AUD was the strongest currency while the GBP was the weakest. There were some significant changes last week with the USD, EUR and AUD gaining 2 points, the CAD lost 3 points while the GBP and NZD lost 2 points. The other currencies remained around the same level of last week with a maximum change in the strength of just 1 point.
Last week there was a Classification change and we will look at it at more detail in this article.

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13 Weeks Currency Score Strength

The 13 Weeks Currency Strength and the 13 Weeks Average are provided here below. This data and the “13 weeks Currency Classification” are considered for deciding on the preferred range. Because it is not ideal nor desired to change the range for a currency every single week, we perform several checks to avoid this.

  1. First of all the strength over a period of the last 13 weeks is considered. See each row for more information.
  2. Next, the 13 weeks average is considered, see the last row called “Avg. 13 wks.”
  3. The number of weeks that a currency was stronger than another currency can also be considered.
  4. The Technical Analysis (TA) Charts for each Time Frame could also be consulted.

For analyzing the best pairs to trade looking from a longer-term perspective the last 13 weeks Currency Classification can be used in support.
This was updated on 06 August 2017 and is provided here for reference purposes:
Strong: EUR and NZD. The preferred range is from 7 to 8.
Neutral: AUD, CAD and CHF. The preferred range is 4 to 6.
Weak: USD, JPY, GBP. The preferred range is from 1 to 3.

When looking at the Average 13 wks. Score we can see that the EUR and the NZD are clearly grouped together as Strong currencies.
We can also see that the USD, JPY and GBP are also grouped together being all Weak currencies. The CHF lost some strength in the last 7 weeks and the Average 13 wks. Score shows that this currency fits better in the group of neutral currencies so it changed Classification from Strong to Neutral. It is now together with the AUD and the CAD in the group of Neutral currencies.

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Classification review

This week we take a look at the Neutral currencies. As can be seen in the chart the CHF lost a lot of strength and is now a Neutral currency. The CAD was getting stronger but lost a lot of strength last week and back to a Score within the Neutral range. The AUD seems to gain strength but is still a Neutral currency. It will need to continue performing good in the coming weeks before it can become a Strong currency.Below you can see the Weekly Currency Score Chart with the 6 months’ data as a reference.


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Currency Score Comparison

“Comparison table” and the “Ranking and Rating list”

The Forex Currency Comparison Table compares each currency with its counterpart based on the Currency Score. For more information about the currency Score of this week, you can read the article “Forex Ranking, Rating and Score” which is published every week together with this article.
By using the comparison table directly below you can get a view without the volatility and statistics as opposed to the “Ranking and Rating list”. Only the strength of each currency against the counterparts is analyzed by using the Technical analysis charts of the 4 Time Frames that are also used for the “Ranking and Rating List”.
The information from the Comparison Table is the source for calculating the “Ranking and Rating List” where this list additionally uses the volatility and statistics for creating the best and worst performer in the list from number 1 to 28.

The information is published once a week and be aware that rates change during this period. The mentioned scores also change and different opportunities may show up. There are many ways to follow the rate changes. This can be done e.g. by looking at the charts and checking e.g. the Ichimoku and/or MACD in the Weekly and Daily chart. There are also many tools, apps and websites where the movement of trading rates of currencies is shown in different automated ways. This may be in pips or through percentage differences or by comparing the values of indicators like the RSI, Moving Averages, MACD, Ichimoku etc. On my blog a Heatmap is available that can be of use also.

“Comparison table” and the “Currency Score Chart”

The additional value of this table compared to the Currency Score table is that the Comparison Table compares the strength between the currencies of each pair. By subtracting the strength of the weaker currency from the stronger currency we have a way to compare each pair combination.
The comparison table provides a way to compare currencies from a longer-term perspective of 13 weeks and also simultaneously taking the current trend into account. By coloring the currencies in the X and Y axis according to their Classification we can show what the best combinations are.

Comparison table Guide

  1. First of all better-classified currencies in combination with weaker-classified currencies can always be traded. Of course, weaker-classified currencies in combination with better-classified currencies can always be traded. The Currency Score difference may be negative. In that case, the trade should be made after a pullback. In other words, a trade can then only take place after a recovery and the main trend being confirmed again.
  2. Second, only equally classified currencies are approved when there is a positive Currency Score difference. Also here, the trend has to be confirmed again.
    The difference between point 2 and 1 is that the long trend is not clear with 2 equally qualified currencies because that pair is in a sideway market. For that reason, the Currency Score difference cannot have a negative difference. A positive difference confirms the momentum for a short revival.
  3. Third, only Neutral currencies are Approved against a better-classified currency when there is a Currency Score difference of at least 4. In the case of a currency worse classified, the Currency Score difference has to be at least -4.
    The above-mentioned situations applicable to this point may happen when there is a clear reversal and the chart is showing a new trend with good entries in the new direction. The difference between point 3 and the previous 2 points is that with point 3 a reversal in the whole market is possible when looking at all the currencies together. This gives a better chance when a trend reversal takes place compared to point 1 and 2!
  4. By preference, each currency should be selected for a trade with a score difference as far apart from each other as possible in the range from 1 to 8. However, these opportunities are rare and for that reason point 1 offers flexibility and is the best choice to trade, point 2 is the second best and point 3 is the third best choice.
  5. The classification of the currencies in question may change in the longer term. Even though currencies may be in the same category a currency may be in a weaker/stronger period and may even change its classification in the future. See the current classification for the coming period at the beginning of this article.

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Putting the pieces together

Based on the last “13 Weeks currency classification” and the “Currency Comparison Table” the most interesting currencies for going long seem to be the:
EUR, AUD and NZD.
These are Strong or Neutral currencies from a longer term perspective when looking at the last “13 Weeks currency classification”.

For going short the same analysis can be done and the following currencies seem to fit best:
GBP, CHF and USD.
These are Weak or Neutral currencies from a longer term perspective.

Currencies with a high deviation seem less interesting to trade because they are less predictable. A good example now is/are e.g. the:
JPY and CHF.

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Besides this article, I also use the Forex “Ranking, Rating and Score” which is also available once a week on my blog. In the article “Ranking, Rating and Score” we look in more detail at the absolute position of the currencies and pairs.

It is recommended to read the page “Currency score explained”, “Introduction to the FxTaTrader Forex Models” and “Statistics and Probabilities” for a better understanding of the article. If you would like to use this article then mention the source by providing the URL FxTaTrader.com or the direct link to this article. Good luck in the coming week.

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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 a recommendation to purchase any financial instruments. The choice and risk are always yours. Thank you.

Forex Metrics and Chart Week 32/ 2017

 The Top 10 of the Ranking and Rating list for the coming week shows the following stronger currencies being well represented for going long: the EUR(4X) followed by the AUD(2X) with the NZD(2X). The weaker currencies are the GBP(5X) followed by the CHF(3X) and the CAD(2X).
By diversifying a nice combination can be traded in the coming week like e.g.:

  • EUR/GBP with the GBP/NZD
  • GBP/AUD with the EUR/CAD

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Ranking and Rating list

Analysis based on TA charts for all the major currency pairs. Good luck to all. No advice, just info. Every week the Forex ranking rating list will be prepared for the weekend. All the relevant Time Frames will be analyzed and the ATR and Pip value will be set.

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For analyzing the best pairs to trade looking from a longer-term perspective the last 13 weeks Currency Classification can be used in support.
This was updated on 06 August 2017 and is provided here for reference purposes:
Strong: EUR and NZD. The preferred range is from 7 to 8.
Neutral: AUD, CAD and CHF. The preferred range is 4 to 6.
Weak: USD, JPY, GBP. The preferred range is from 1 to 3.

When comparing the 13 weeks Currency Classification with the pairs mentioned in the Ranking List above some would then become less interesting. On the other hand, these pairs are at the top of the list partly also because of their volatility. It seems best to take positions for a short period then and take advantage of the high price movements.
With the FxTaTrader Strategy, these pairs are not traded because these would be trades in the 4 Hour chart or in a lower Time Frame. Nevertheless, they may offer good chances for the short term trader.

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Currency Score Chart

The Currency Score analysis is one of the parameters used for the Ranking and Rating list which is published also in this article. The Currency Score is 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 is the screenshot here below.

When comparing the 13 weeks Currency Classification with the recent Currency Score, as provided in the image above, we can determine the deviations. In the article “Forex Strength and Comparison” this is analyzed in more detail.

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Chart of the Week

The Chart for this week is the GBP/AUD Daily chart.
Price is below the Tenkan-Sen and clearly in a downtrend, the pair made a pullback a few days ago and may continue to consolidate for a few more days before continuing the downtrend.

  1. A nice sell opportunity would be on pullback around the area where the Kijun-Sen is now. Above that is the high of the last Fractal (blue arrow) and together with the lows of the Fractals (purple arrows) in June, this seems like a good resistance area.
  2. Since the PSAR did not turn short yet the target should be modest. Nr. 2 in the chart shows where the price is at the opening of this week but also where there are many highs at the end of July.This seems a good level to take profit.
  3. The MACD will get stronger but once the MACD minus Signal (blue and red bars) starts showing weakness it becomes interesting for looking at an entry. This is also the case now but price should first to the level explained in point 1.

The 4H. chart may offer good information for the entry price. There is then a range of +/- 200 Pips to the level discussed in point 2 and taking profit there seems realistic.

  • This is a pair that fits best in Point 1 of the Comparison Table Guide which you can also read here below.
    • First of all better-classified currencies in combination with weaker-classified currencies can always be traded. Of course, weaker-classified currencies in combination with better-classified currencies can always be traded. The Currency Score difference may be negative. In that case, the trade should be made after a pullback. In other words, a trade can then only take place after a recovery and the main trend being confirmed again.
  • The GBP is a Weak currency and the AUD a Neutral currency, the Currency Score Difference is 6.

For more information about the “Comparison Table Guide” read my other Weekly article called the “Forex Strength and Comparison”.

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Besides this article, I also use the Forex “Strength and Comparison” which is also available once a week on my blog. In that article, we look in more detail at the relative position of the currencies and pairs. We will look in more detail at the interesting pairs from a longer term perspective for trading in the Daily and Weekly chart. We will use the information from this article, “Ranking, Rating and Score”, and analyze it further in more detail.

It is recommended to read the page “Currency score explained”, “Introduction to the FxTaTrader Forex Models” and “Statistics and Probabilities” for a better understanding of the article. If you would like to use this article, then mention the source by providing the URL FxTaTrader.com or the direct link to this article. Good luck in the coming week.

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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 a recommendation to purchase any financial instruments. The choice and risk are always yours. Thank you.

Monday, August 7, 2017
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