Forex Forecast: Pairs In Focus - Sunday, May 9

Photo by Dmitry Demidko on Unsplash

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 momentum in favor of the Canadian dollar, gold, and the euro against the U.S. dollar.

Big Picture May 9

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 U.S. dollar.

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 4220, and to be long of the CAD/JPY currency cross. We did not get a close above 4220 in the S&P 500 Index until Friday, but the CAD/JPY cross rose over the week by 0.65%, giving an average win of 0.33%.

Fundamental Analysis & Market Sentiment

The headline takeaway from last week was the surprisingly low number of new non-farm payroll jobs created over the past month in the U.S., which came in at only 266k compared to the consensus forecast of 990k, while the unemployment rate is now 6.1% compared to the 5.8% which had been expected. This hit the U.S. dollar hard and boosted a range of assets against the greenback, including the euro, gold, the Canadian dollar, and the U.S. stock market, which closed Friday at an all-time high.

The U.S. dollar may now be more vulnerable going forward as the Federal Reserve is unwilling to discuss tapering its bond purchase program, although other central banks are beginning to do so. We are now seeing evidence that the pace of growth in the U.S. is nothing special in global terms, but the weakness of the dollar we saw on Friday was able to lift the stock market, so it would be overstating things to say there is pessimism on the economy: risk-on sentiment survives.

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