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 August 27

Last week, I saw the best possible trade for the coming week long of the Japanese Yen and Swiss Franc, and short of the U.S. Dollar. The result overall was positive: the USD/JPY rose by 0.11%, but USD/CHF fell by 0.90%, producing an average gain of 0.40%.

The major event last week was the Jackson Hole summit of central bankers which began right at the end of the week. Speeches from Janet Yellen and Mario Draghi were keenly awaited. Yellen’s speech was not hawkish on the U.S. Dollar, which triggered a fall in the value of the Dollar, while Draghi’s speech failed to talk down the value of the Euro, so the Euro rose quite strongly to reach a two-and-a-half-year high price.

The news agenda this week will be dominated by several items of key U.S. economic data, most notably Friday’s Non-Farm Payroll data, which is usually the second most important driver of the Forex market.

Following the current picture, I see the highest probability trade this week as long of the Euro, and short of the U.S. Dollar.

Fundamental Analysis & Market Sentiment

The major sentiment in the market currently is a bearishness on the U.S. Dollar, which is boosted by the persistent and long-term bear market in the Dollar, and the relative weakness of Yellen’s rhetoric and U.S. economic data. This is in line with the long-term market trend, so the market appears relatively settled. If the U.S. economic data releases due later in the week disappoint, the trend should extend further, and the line of least resistance is against the greenback.