There seems to be little change to the currency strength meter this week, but it tells us that there’s some trending markets around that we can take advantage of.
Last week data was light, the US government shutdown has continued and Fed Chair Powell revitalised the need to cut rates.
The narrative for me remains in the risk sentiment.
Having a look at the fear and greed index on CNN it shows the market is still fearful, however it has moved out of the “Extreme Fear” category. If however we see an increase in trade tensions between Trump and China it could bring us right back into it.
That being said let’s take a look at what moved last week.
Strong Currencies
My currency strength meter highlights these currencies as the strongest as of last week:
CHF: The Swiss Franc reclaims the solo top spot after strength returned via the fear in the market. This could drive the Swiss National Bank into negative interest rates soon. For now this remains a currency I want to buy, unless the fear sentiment fades.
USD: You may think because of the interest rate cuts in the US the USD would be bearish still. Well that has shifted since the risk sentiment did. Again, if this remains it could be a currency to buy against the weaker ones.
Weak Currencies
Looking at the opposite side of the strength meter now, these are the weakest of last week:
NZD: Recent CPI data surprised higher overnight giving the NZD a little boost, however this currency is struggling and as I am a betting man, this to me is a currency I want to short in the near term as the RBNZ sentiment is dovish.
JPY: From a trend perspective the Japanese Yen is a weak currency although it did strengthen last week. This sentiment has been driven by the political shifts in Japan, but as this fades, the weakness could return.
Markets to watch
Based off of the above these are the currency pairs on my trading watchlist:
Bullish | Bearish |
CHFJPY | NZDCHF |
USDJPY | NZDUSD |