Forex Strength And Comparison For Week 47 / 2016

The USD was the strongest currency and the EUR the weakest. The AUD is in a dip with a score of 2 and the CAD on a high with a score of 6. The JPY lost a lot of strength in the last weeks but seems to stabilize and the GBP gained a lot of strength but seems to stabilize also. For more details read both of my articles where the relevant Charts and Tables are provided.

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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 25 September 2016 and is provided here for reference purposes:
Strong: USD, JPY, NZD. The preferred range is from 6 to 8.
Neutral: CHF, AUD. The preferred range is from 4 to 5.
Weak: EUR, GBP, CAD. The preferred range is from 1 to 3.


The JPY (Strong) is now the weakest one of the strong currencies but still a lot stronger compared to the Neutral currencies. It succeeded last week to have a Score of 3 and gained 1 point but is still far outside the range of the strong currencies, 6 to 8.
The GBP (Weak) is almost similar to previous week but it lost 1 point having a Score of 4. The 13W. Average Score is still the lowest of all but now getting close to the CAD Weak) while the GBP (Weak) has been clearly a lot weaker compared to all the currencies in the last period.

Until now the Classification made on 25 September 2016 is valid for 9 weeks. As it seems it will remain this way for the coming weeks because the distances between the Average 13 wks. Score of the currencies in each Classification are too far from the other Classifications. This can easily be seen by checking the Average 13 wks. Score of the Neutral currencies. These are in the range of 4,4615 and 4,7692 and more than 1 point higher than the Weak currencies. However it is only +/- 0,7 points away from the Strong currencies so the JPY (Strong) seems vulnerable.

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The Strong Currencies

The JPY had a dip in the last period but it recovered with 1 point last week. The USD remained strong and the NZD recovered from the small dip in the previous week. 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.

 

"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. In doing this we apply 2 rules to make it clearer.

  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 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:
EUR and AUD
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 at the moment is e.g. the:
CAD, JPY and AUD. 
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: EUR/USD, AUD/USD, EUR/CAD, USD/JPY, GBP/USD, AUD/NZD, NZD/JPY, USD/CHF, EUR/CHF, GBP/NZD and USD/CAD.
 

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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