Forex Forecast: Pairs In Focus - Sunday, Mar. 7

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.

Dollar, Hong Kong, Butterfly, Origami

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 some valid and strong long-term trends in favor of the U.S. dollar and against some other traditional safe havens such as gold (GLD), the Swiss franc (FXF) and the Japanese yen.

Big Picture March 7, 2021

Last week’s Forex market saw the strongest rise in the relative value of the U.S. dollar and the strongest fall in the relative value of the Swiss franc. There is a long-term bullish trend in the U.S. dollar, which is making the Forex market quite interesting to trade now.

Fundamental Analysis & Market Sentiment

The headline takeaway is that we saw last week a continuation of a recent change in market sentiment which is mixed and hard to describe. It is neither risk-off nor risk-on, but is driven more by whether assets are in favor or not. Although major global stock indices fell sharply at times last week, some ended the week higher in the U.S. (e.g., Dow Jones 30, S&P 500), while others fell (e.g., the NASDAQ 100, Nikkei 225, Hang Seng). In the U.S., the “old economy” has outperformed the new, which can be seen from the fact that the Down Jones 30 has outperformed the S&P 500.

We are seeing a continuing strong rise in the relative value of the U.S. dollar, driven partly by the increase in the 10-year U.S. Treasury yield to well beyond the benchmark 1.5% rate, and partly by another anticipated event which has just become reality – the passage of another coronavirus relief / economic stimulus package by the U.S. Senate, which will shortly become law and mandate the spending of a further $1.9 trillion in federal funds. This will inject liquidity into the economy and provide most adult Americans with direct one-off payments of $1,400.

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