How To Identify Strong And Weak Currencies?

Gauging overall currency strength is a very useful way of evaluating whether sentiment is pushing prices in line with fundamentals or against them.
Share on facebook
Share on google
Share on twitter
Share on linkedin
how to identify strong and weak currencies
Follow me
An experienced currency analyst that specialises in short term sentiment and news driven trading.
Follow me
Latest posts by Arno Venter (see all)

Use this Currency HeatMap to help you quickly identify and trade the strongest currencies against the weakest currencies. (Opens in a new page.)

Strong And Weak Currencies – The Best Way To Identify Them

We just have a quick question here from Paul, asking us whether we use any type of strength meters to gauge the strength of currencies, versus the overall sentiment.

So we do use one, Paul, the one that we normally use is the Zenith platform. You can see this screen that we’re seeing, is basically on the left-hand side, we have equity futures Americas, Europe, as well as Asia-Pac. Below that, we have commodities, and then looking at a few ETFs as well.


The Secret To Pairing Currencies Profitably

Why Central Banks Weaken Currencies

The Most Dangerous Currency Pairs To Trade

And then bond yields, and then on the right-hand side, we have a currency one that we’ve set up, which is basically, we’ve set it up in a way that the currency we want to look is always going to be the base.

So we have the Aussie, CAD, Kiwi, Swiss, Yen, Euro, Pound and U.S. dollar, you can obviously do this for more currencies if you want, but this gives us a very clear gauge in terms of which currencies are leading the pack to the upside and which ones are leading the pack to the downside.

So just by looking at red and green we can see weakness across the board for the Aussie, CAD, Kiwi and the Euro, and we’re seeing strength across the board for the Swiss, the Japanese Yen, the Pound, as well as the U.S. Dollar.

So we do use Zenith but there’s a couple of free sources that you can use that will give you the exact same information like the ones that we use on Zenith.

A couple of examples there would be, the first one is, you can actually setup a currency portfolio for yourself and we’ve built it the exact same way like we’ve done in Zenith, so you can also see we’ve basically just compared the base currencies with the quote currencies.

To make sure that we’re always looking at the right currencies when we wanna gauge the overall strength, and you can see a similar view there, Aussie, CAD, Kiwi weakness, sometimes there’s a little bit of lag in the Yen data, I’m not sure why that is. Also seeing strength in the Swiss and the Pound, as well as the Dollar, just like we saw on the Zenith one.

Then you can also use, if you go to their Forex section, they have a one-day relative performance measure that you can use, and if we just compare what we’ve just seen, in terms, we could just saw, it just moved just now.

If we just compare this with what we saw on the Zenith, if we just quickly open that up, we can see, leading the pack to the downside, we have the Aussie, leading to the upside, is the Pound, and if we just compare that with FINVIZ, we can see Aussie to the downside, Pound to the upside and then we also see weakness in the CAD, the Euro and the Kiwi. So there’s a couple of ones that you can use.

There’s also a few other paid sources that specifically looks at strength meters like charts and all that, but I mean, it’s really, I’m sure it can be useful in some senses, but it’s not really something we look at from a trading perspective. We just use it to gauge the overall, the overall strength, and seeing whether what we are expecting to see based on the sentiment and the fundamentals, whether that is playing out, in terms of the actual strength and weakness that we’re seeing in the currency.

So we won’t ever use this as a trade idea, for example, so if there’s no sentiment or any fundamental striving or pair, but we see, you know, the Aussie is strong and the Swiss is, or weak and strong.

We won’t just pair them and trade them just because they’re strong and weak, we’ll always want a sentiment and fundamental reason for why it should be strong or weak, and then just use this as a gauge to see whether the market is corresponding to that particular sentiment.

So I hope that helps there, Paul. Any other questions, just let us know.


Learn To Trade Independently And Confidently

Know What To Buy & Sell Everyday.

0 0 vote
Article Rating




A Financial Source subscription is just $97 per month. Cancel in two clicks.
*Limited offer. Normally $247.
Notify of
Inline Feedbacks
View all comments