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 6th March 2016

Last week I highlighted short GBP/USD and short USD/JPY from 144.50. Short GBP/USD did not work out well at all, but the USD/JPY pair did fall from its peak of 114.55 by about 130 pips at maximum, so that did provide a good swing trading opportunity.

Fundamental Analysis & Market Sentiment

The stand out case where fundamental analysis and sentiment can be applied at the current time is the British Pound. Britain will be voting in June on a referendum on exiting the European Union. If Britain votes to leave – and that is a realistic prospect – it could call the entire future of the European project into question. Several senior politicians have come out in favor of exit, and at the same time the central bank has been revising its economic projections downwards and hinting at a delay in any possible future tightening of monetary policy. Taken together, these factors produce an excellent case for selling the British Pound. However, although opinion polls have been showing the “leave” and “remain camps neck and neck, fundamentals seem to be playing no role in the recent rise in the Pound, but rather a feeling that the currency is at a historical low which represents excellent value as a buying opportunity.

Sentiment shifted this week quite decisively from risk-off to risk-on. This has impacted the Japanese Yen, which had been the ultimate safe haven currency and which is now tending to fall as money flows out of safety and into risk.