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 May 6 

In my previous piece last week, I forecast that the best trades would be short GBP/USD and long USD/SEK. GBP/USD fell strongly, by 1.81%, while USD/SEK rose by 1.64%, giving a large average win of 1.73%.

Last week saw a continuing strength in the U.S. Dollar, while almost every other currency except the Japanese Yen fell in their relative values against the greenback. The U.S. Dollar Index made another new 4-month high price, while the U.S. stock market (represented by the S&P 500 Index) is showing a little life but remains trapped between a bearish trend line and the 200-day moving average. Crude Oil has continued to rise to new long-term high prices, making another new three-year high. The British Pound, and to a lesser extent the Euro, are looking weak.

The major economic data releases last week were U.S. Non-Farm Payrolls and Average Hourly Earnings data which came in weaker than expected. However, the weakness did not halt the continuing strength in the U.S. Dollar, which is a bullish sign for that currency. The major political driver this week is tension over what will happen regarding the Iran deal as U.S. sanctions policy against Iran comes up for renewal on 12th May.

Fundamental Analysis & Market Sentiment

Fundamental analysis tends to support the U.S. Dollar; and this seems to be increasingly supported by sentiment. The 10-year yield remains close to 3% but GDP looks strong. Sentiment has turned sour on the British Pound as GDP data shows its economy is barely growing.