We have seen some significant changes to the currency strength meter this week with risk currencies AUD and NZD outperforming most.
But this week could change again dramatically.
Some events to look out for:
We have a RBA meeting tomorrow which is forecast to leave rates unchanged due to the recent rise in inflation.
The Bank of England is forecast to hold rates at 4% because they are stuck waiting for the Labour government’s autumn budget.
If the US government shutdown goes past Wednesday it will beat the longest shutdown in US history. That could come with its own risks.
Strong Currencies
My currency strength meter highlights these currencies as the strongest as of last week:
CHF: The Swiss Franc remains the top dog for now, extending this run to 3 weeks. If the risk off sentiment returns then the CHF will likely remain the strongest currency.
USD: In history after the shutdown ends the USD can rally so it will be important to watch the price action if we do see a resolution this trading week.
Weak Currencies
Looking at the opposite side of the strength meter now, these are the weakest of last week:
JPY: The Japanese Yen becomes the weakest currency, the BoJ left interest rates unchanged and has moved to a more neutral position. They still see rate hikes in the future but they will be watching inflation closely.
GBP: I have been looking for GBP weakness for a while and it’s starting to show on the currency strength meter now. It could be a tricky week to trade the GBP but I am still on the bearish side as it looks more likely the UK will see tax hikes and less growth over the next year.
Markets to watch
Based off of the above these are the currency pairs on my trading watchlist:
Bullish | Bearish |
CHFJPY | GBPCHF |
USDJPY | GBPUSD |