Forex Forecast: Pairs In Focus - Sunday, May 2

U.S. dollar banknote with map

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 a few 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 momentum in favor of the Canadian and Australian collars and against the Japanese yen.

Big Picture May 2

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

I wrote in my previous piece last week that the best trade was likely to be long of the S&P 500 following a daily (New York) close above 4200. We did not get such a close until Thursday, when the index closed at 4209.2. It ended the week the next day down at 4181, giving a loss of 0.67%.

Fundamental Analysis & Market Sentiment

The headline takeaway from last week is that market sentiment remains risk-on, especially on the U.S. which is seeing growth and payroll estimations continue to rise. Demand has been stoked by dovish monetary policies plus stimulus in the U.S., despite fears that policy will lead to untenable inflationary pressures and of higher corporate taxes. The major U.S. stock index, the S&P 500, briefly traded at a new all-time high price on Thursday above 4220.

The U.S. Dollar Index rose in value last week, although action in the Forex market was dominated by strong Canadian and Australian dollars while the Japanese yen weakened. We see long-term strength in the Canadian dollar, which is backed by fundamental factors and the policies of the Bank of Canada.

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