Forex Forecast: Pairs In Focus – 1/31/2016

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 31st January 2016

Last week I highlighted short AUD/USD and GBP/USD as the probable best trades of the week. This did not work out well as the AUD/USD pair actually rose by 1.21% although the GBP/USD pair did fall by 0.14%.

For this coming week, in spite of the fact that there are counter-trend moves happening, I have to remain with the long-term trends where the candlestick action of recent days does not look as if it has a very strong continuation due for the counter-trend movement. Therefore I would still look to be short GBP/USD and EUR/USD as well as long USD/CHF. Basically, the European currencies are all looking weak right now.

Fundamental Analysis & Market Sentiment

The strongest currency is the USD now that the Bank of Japan has cut its interest rate. Regarding the USD, the fundamental data could be stronger, however there have been no bad surprises. The problem is that the Federal Reserve has just signaled that the course of rate hikes is quite likely to happen more slowly than was previously expected. Federal Reserve of gradual rate rises. The position technically for the USD also looks quite strong. The currency is now trading higher than it was 6 months ago against every major global currency except the JPY.

Weaker currencies are very clear: all the European currencies.

Eurozone fundamental data has been showing the beginning of a recovery, but the talk by the ECB of further QE is likely to act as a weakening factor upon the Euro.