Forex Forecast: Pairs In Focus - Sunday, May 16

10 and 20 us dollar bill

The difference between success and failure in Forex trading is very likely to depend mostly upon which currency pairs you choose to trade each week and in which direction, and not on the exact trading methods you might use to determine trade entries and exits.

When starting the trading week, it is a good idea to look at the big picture of what is developing in the market as a whole and how such developments and affected by macro fundamentals and market sentiment.

It is a good time to be trading markets right now, as there are several valid long-term bullish trends in major U.S. stock market indices which can be traded at most Forex brokers as CFDs, as well as long-term bullish momentum in favor of the Canadian dollar, gold, and the euro against the U.S. dollar.

Big Picture May 16

Last week’s Forex market saw the strongest rise in the relative value of the British pound and the strongest fall in the relative value of the Japanese yen.

I wrote in my previous piece last week that the best trades were likely to be long of the S&P 500 Index, EUR/USD, and gold following a daily close above $1831, as well as short of the USD/CAD. The S&P 500 Index closed the week down by 1.29%, EUR/USD fell by 0.15%, the USD/CAD fell by 0.24%, while gold rose by 0.65%. This produced a small averaged loss of 0.14%.

Fundamental Analysis & Market Sentiment

The headline takeaway from last week was the surprisingly high U.S. inflation print released during the second half of the week, which showed annualized inflation in the U.S. currently running at 3%, a 25-year high. This rattled risk sentiment and we saw quite sharp falls in stock markets globally and in other risky assets, with the greenback benefiting from safe-haven flow. However, risk sentiment recovered quite strongly on Friday, with major stock indices rebounding strongly, while gold again closed at a new multi-month high daily closing price.

The main events this coming week will be releases of British and Canadian inflation data plus the Reserve Bank of Australia’s Monetary Policy Meeting Minutes.

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