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 21st February 2016

Last week I highlighted long Gold and EUR/USD and short USD/JPY as the probable best trades of the week. This did not work out so very well as although the USD/JPY fell by 0.74%, Gold fell by 0.85%, and the EUR/USD also fell by 0.95%. This gave an average loss of 0.35% per pair. However, Gold and USD/JPY did provide the best swing or day trading opportunities during the week, so I was right to highlight them as having good trading potential.

Fundamental Analysis & Market Sentiment

At the moment, fundamental analysis is not going to be very useful, as we look to be at the end of major trends. Markets are currently being driven very strongly by sentiment which can shift from day to day and not by the macro environment as expressed through fundamental analysis. The only point worth making here is that over the past couple of weeks several central banks have begun making more dovish noises, which have sent many currencies plummeting from day to day.

An analysis of market sentiment is likely to be more fruitful. As the market becomes more fearful of a U.S. economic recession, the JPY, EUR and Gold tend to rise.

This week I cannot fully rely the long-term trends and instead want pick three pairs that have sentiment as well as trend behind them.

Technical Analysis

Gold

The daily chart below shows how this pair has shot upwards over the past few weeks, reversing the action of almost an entire year during which the price of the metal was very flat. The price has made a new 1 year high and touched the key psychological level of $1250.