How to create and use a currency matrix for the major currency pairs

How to create and use a currency matrix for the major currency pairs

In this video we explain how to create your own currency matrix for tracking the currency majors in all timeframes. Using this approach you will be able to quickly assess the strength or weakness in the US dollar and whether this is universal across the complex. In addition this also offers a multichart view of volume price analysis across the pairs and helps to confirm your trading decisions. This approach can also be applied to any other of the currency pairs in the same way, so you may wish to create a Japanese yen complex, a euro complex etc.

00:11

Introduction and market overview

00:11

The speaker apologizes for a brief pause caused by technical difficulties with screen sharing and chat visibility. They then begin by discussing the current state of market indices, noting that the activity has been rather lackluster with predominantly sideways price movement.

00:41

Currency majors matrix explained

00:41

The speaker introduces a visual representation of the major currency pairs, referring to it as a manual version of the currency matrix. This includes six major currencies: US Dollar, Australian Dollar, Euro, Canadian Dollar, New Zealand Dollar, and Swiss Franc. The visualization aims to consolidate and display key information about these currency majors.

01:13

Dollar buying strength analysis

01:13

The segment provides an overview of the current market activity focusing on the US dollar as the counter currency. It highlights strong dollar buying, evident from the widening candle spreads and rising volume. The selling pressure on the British Pound is also emphasized, with the currency strength indicator showing a steep decline, particularly in the Pound against the Canadian Dollar. This indicates a strong reversal from the previous uptrend.

02:15

Pound CAD reversal and trend

02:15

The segment discusses the development of a strong downtrend in the pound versus the Canadian dollar, observed on a three-minute chart. The Canadian dollar is rising sharply while the pound is falling, creating a clear trend reversal from an uptrend to a downtrend. Traders entering early in the trend must be patient and use wider stop-losses due to increased risk, but they also stand to benefit from the trend’s momentum. This pattern is confirmed across related currency pairs like the US dollar against the British pound, Australian dollar, and euro, indicating a broader market movement. The speaker references the dollar CAD to further illustrate the trend dynamics.

03:40

Congestion in dollar CAD explained

03:40

The segment explains why the currency pair is showing congestion despite strong movement. Both the Canadian and US dollars are rising together, resulting in little differential momentum to drive the trend. The speaker uses the analogy of two trains on parallel tracks moving at slightly different speeds but in the same direction, illustrating why the currency pair remains congested without significant directional momentum.

04:38

NZD and dollar Swiss movements

04:38

The speaker discusses currency movements, noting New Zealand dollar is falling while the US dollar is rising. They then analyze the US dollar versus the Swiss franc, observing both currencies are strengthening. This example illustrates the complexity and power of the currency indications being referenced.

05:07

Using currency strength indicator

05:07

The speaker explains how a strength indicator helps traders identify which currencies are moving and which are in congestion, guiding decisions on which currency pairs to trade or avoid. The current market trend involves buying the dollar broadly, though not against the Swiss franc or Canadian dollar, which have other drivers. Trading with this matrix reduces risk by aligning trades with overall market sentiment. Trading against the flow is possible if justified by local factors like political events or news, exemplified by Brexit. Many traders mistakenly focus on single charts without considering related currency pairs. Additional tools mentioned include a tick speedometer, volume indicator, and trend monitor to provide further market insights.

06:56

Volume, trend, and candlestick patterns analysis

06:56

The speaker explains the advantages of using a matrix approach in trading, which provides multiple perspectives by analyzing charts and volume across different markets. This method allows traders to see inverse relationships, such as between the dollar Swiss and the euro dollar, and to interpret bearish engulfing and up-thrust candle patterns more effectively. By overlaying these patterns and considering volume data on correlated pairs, traders gain confirmation and a broader understanding, rather than trading a single pair in isolation. This holistic approach is described as a powerful way to trade Forex.

By Anna Coulling – creator of volume price analysis