Forex Strength And Comparison For Week 41

The USD is the strongest currencyThe GBP is clearly the weakest and the CAD lost a lot of strength in the last 5 weeks. The USD and EUR became stronger in the last week and the NZD lost direction in the last 3 weeks by going from 3 to 6 and back to 3. 

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13 Weeks Currency Score Strength

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 13 weeks. See each row for more information.
  2. Then the 13 weeks average, see the last row called "Avg. 13 wks."
  3. The number of weeks that a currency is stronger than another currency can also be evaluated.
  4. The TA Charts for each Time Frame can 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 25 September 2016 and is provided here for reference purposes:
Strong: USD, JPY, NZD. The preferred range is from 6 to 8.
Average: CHF, AUD. The preferred range is from 4 to 5.
Weak: EUR, GBP, CAD. The preferred range is from 1 to 3.

The USD(Strong) has an Average score higher but close to the AUD(Average) and it had only 6 times a higher score in the last 13 Weeks. For these reasons the USD is close to become an average currency and this was avoided last week because of the high score of 8.
The EUR(Weak) has an Average score lower but close to the CHF(Average) and it had only 6 times a higher score in the last 13 Weeks. However, the score of the EUR is more in the range of the average currencies than the Weak currencies. This currency will be monitored closely in the coming week and may become an Average currency.
Below is the Weekly Currency Score Chart with 6 months data as a reference.

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The Weak Currencies

The EUR is moving away from the other weak currencies and getting more in the range of the average and strong currencies.

 

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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.
By using the comparison table below you can get a view without the volatility and statistics. 
The information from the Comparison Table is the source for calculating the "Ranking and Rating List". 

 

"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. 

  1. First of all only better classified currencies in combination with weaker classified currencies are "Approved" when there is a Currency Score difference of at least 1 in the current week.
  2. The only exception is when 2 currencies are similarly classified but the Currency Score difference is equal to or more than 4.
  3. It means that each currency should be as far apart from each other as possible in the range from 1 to 8. The classification of the currencies in question may change in the longer term. By using the difference of 4 which is exact at the half of the range it seems a safe approach for trading 2 currencies which are similarly classified.
  4. Even though currencies may be in the same classification 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:
USD, JPY and AUD

These are strong or average 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, CAD
These are weak or average currencies from a longer term perspective.

Currencies with a high deviation seem less interesting to trade because they are less predictable. These currencies seem to be at the moment e.g. the:
EUR and NZD. 
Unless these currencies offer a clear opportunity based on the longer term it seems best to be avoided. However, these currencies may offer opportunities for the short term trader.

Some of the pairs in the "Currency Comparison Table" comply for a longer term trade based on the Technical Analysis (TA) of the Daily and Weekly chart. For the coming week these seem to be: GBP/USD, GBP/JPY, EUR/GBP, GBP/AUD, GBP/CHF, AUD/CAD, CAD/CHF.

 

Disclaimer: The articles are my personal opinion, not recommendations, FX trading is risky and not suitable for everyone.The content is for ...

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