Forex Forecast: Pairs In Focus - Sunday, May 30

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 not an especially good time to be trading markets right now, as there are only a few valid long-term trends to exploit, most notably the bullish trend in bold against the U.S. collar.

Big Picture May 30

Last week’s Forex market saw the strongest rise in the relative value of the New Zealand dollar 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 gold in USD terms and short of USD/CAD. Gold in USD terms rose by 1.18% over the week, while the USD/CAD currency pair rose by 0.08%. This produced an averaged win of 0.55%.

Fundamental Analysis & Market Sentiment

The headline takeaway from last week was the continuation of risk appetite although it has become considerably more muted as fears of resurgent inflation increase, especially concerning the U.S. economy. We are seeing a mixed picture across markets, with fewer clear trends surviving. The precious metal gold remains strong, while the Canadian and New Zealand dollars have the greatest long-term strength of any major currency – commodity currencies are generally strong. The Japanese yen is the weakest major currency.

Last week saw the Reserve Bank of New Zealand take a more hawkish tilt in its monetary policy, which has probably helped the Kiwi to remain strong. Technically, it is one of the strongest major currencies, so it may be a buy according to both technical and fundamental analysis.

The main events this coming week will be releases of U.S. non-farm payrolls data plus the Reserve Bank of Australia’s rate statement and Australian GDP data. This suggests that the USD (Thursday and Friday) and the AUD (Tuesday and Wednesday) are likely to experience volatility over this coming week.

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