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 9

Last week, I saw the best possible trades for the coming week as long EUR/USD and long GBP/USD. The results here would have been negative overall, with the EUR/USD falling slightly, by 0.15%, and the GBP/USD falling by more, at 1.09%. This would have produced an overall average negative result of -0.62%.

The Forex market is now in a more settled mood, with a re-emergence of clear trends, although the U.S. Dollar gained some ground on Friday following the release of a reasonably strong Non-Farm Payrolls number. There is more important input expected this week from major central banks, most notably the Federal Reserve with Janet Yellen’s testimony before the Senate Banking committee, as well as the Bank of Canada’s monthly report. I forecast that the best trade this week will be long EUR/JPY and CAD/JPY.

Fundamental Analysis & Market Sentiment

The major element affecting market sentiment at present are a view that almost all major central banks have now indicated they are on courses of tightening monetary policy, with the notable exception of the Bank of Japan. Although the Federal Reserve was the first major central bank to turn towards a tighter policy, its actions are now being overshadowed. There is a slightly more bullish outlook on the U.S. Dollar. The Canadian Dollar remains strong, with increased speculation that the Bank of Canada will raise its interest rate later this week, and the Japanese Yen weak. There is a report that the Bank of Japan will hold off on further monetary easing, but the market may take this as an admission of weakness rather than as a prompt to buy the Yen.