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 July 23

Last week, I saw the best possible trades for the coming week as long EUR/USD and AUD/USD, and short USD/CAD. Each of these components were profitable: the EUR/USD rose by 1.73%, the AUD/USD rose by 1.13%, and the USD/CAD fell by 0.86%, producing an overall positive averaged winning result of 1.24%.

The Forex market remains in a settled mood, with a re-emergence of clear trends, and breakouts into multi-month or even multi-year highs on a few Forex pairs, all against the U.S. Dollar. This comes as sentiment continues to be sour on the U.S. Dollar following more dovish than expected testimony by Janet Yellen, Chair of the Federal Reserve, before Congress two weeks ago. A bullish meeting minutes release by the Reserve Bank of Australia and a hint that a roll-back of QE will begin in October from the European Central Bank helped boost both of those currencies.

This week I forecast that the highest probability trades will be long of the Canadian and New Zealand Dollar, as well as the Euro, and short of the U.S. Dollar.

Fundamental Analysis & Market Sentiment

The major element affecting market sentiment at present is the view that almost all major central banks have now indicated they are on courses of tightening monetary policy, but with much more pessimism concerning the U.S. Dollar as the Federal Reserve has now signaled a slower pace of monetary tightening. This has left the U.S. Dollar with clear weakness in the Forex market, which has been reinforced by recent weak economic data which boosted the dovish case. Crucially, this week we will see a meeting minutes release from the FOMC, which could affect sentiment concerning the greenback. As the Dollar is in a clear and strong bearish trend, it could be wise to expect that an “accident happens along the line of least resistance”, justifying a short USD position in advance.