Forex Forecast: Pairs In Focus - Sunday, May 23

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 fairly good time to be trading markets right now, as there are a couple of valid long-term bullish trends in favor of the Canadian dollar and gold against the U.S. dollar.

Big Picture May 23

Last week’s Forex market saw the strongest rise in the relative value of the Japanese yen and the strongest fall in the relative value of the New Zealand dollar. However, the fluctuations were small, so this is not a very significant fact.

I wrote in my previous piece last week that the best trades were likely to be long of the S&P 500 Index, short of the USD/CAD currency pair, and long of gold in USD terms. The S&P 500 Index closed the week down by 0.34%, the USD/CAD fell by 0.29%, while gold rose by 2.04%. This produced an averaged win of 0.66%.

Fundamental Analysis & Market Sentiment

The headline takeaway from last week was the U.S. Federal Reserve’s apparent new willingness to discuss tapering of its asset purchase program, at least in private. This was revealed in the FOMC meeting minutes release, but in truth, although this was the major news in the Forex market last week, it did not have a major impact. We are seeing a mixed picture across markets, with fewer clear trends surviving. The precious metal gold is strong, while the Canadian dollar has the greatest long-term strength of any major currency. The U.S. dollar remains weak.

The main events this coming week will be releases of preliminary U.S. GDP data plus testimony from the Bank of England before Parliament and the monthly policy release from the Reserve Bank of New Zealand.

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