Forex Forecast: Pairs In Focus - Sunday, Mar. 21

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.

Coins, Cent, Specie, Money, Euro

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 moderate time to be trading markets right now, as there are a few valid long-term trends left in favor of the Australian (FXA) and Canadian dollars against some other traditional safe havens such as the Japanese yen.

Big Picture March 21, 2021

Last week’s Forex market saw the strongest rise in the relative value of the Swiss franc (FXF) and the strongest fall in the relative value of the euro, although the numbers were small enough to have little meaning. Trends in the U.S. dollar are not strongly pronounced at present, with the real action in the Forex market now taking place in other currencies.

I wrote last week that the best trades were likely to be being long of Bitcoin (BITCOMP) and the Canadian dollar and short of the Japanese yen. This was not a profitable call as Bitcoin fell by 1.50% while the CAD/JPY currency cross also fell by 0.41%, giving an averaged loss of 0.96%.

Fundamental Analysis & Market Sentiment

The headline takeaway from last week is that the market sentiment is somewhat confused. Demand has been stoked by dovish monetary policy plus stimulus in the U.S., but it has been shadowed by fears that policy will lead to untenable inflationary pressures.

The U.S. dollar rose slightly over the past week, seeing a renewed increase in the 10-year U.S. Treasury yield to a 14-month high of 1.7%. The pace of the rise in yields over recent weeks has been faster than at any time in the previous 25 years, leading to concern about the re-emergence of inflation as a problem in advanced economies. The major event last week affecting U.S. markets and the Forex market generally was the FOMC statement and forecast which promised no rate hikes through 2023. This was viewed as somewhat unrealistic by analysts, which has spooked the market a bit.

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