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Thomas Long, Course Instructor

The next step is identifying the strong currencies to match up with the weak USD. I try to keep this analysis simple and consistent and to me that means comparing highs and lows on the charts. Here is an example. This first chart is a daily chart of the EUR/USD. Note how the market is still below the 200-day Simple Moving Average and also well below the April high. Now compare that with the second chart which is a daily chart of the GBP/USD. Note how this market is above the 200-day Simple Moving Average and above the April high. To me, this means that the GBP is much stronger than the EUR and that the GBP/USD is a better buy than the EUR/USD. The GBP is showing real strength while the EUR lags. The idea is to match the strongest currency with the weakest currency and to trade that pair. This is an edge that trading FX offers and one worth adding to your approach.

EUR_vs_GBP_body_63418d1280926490-chart-day-eurusd-gbpusd-804.png, EUR vs GBP

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.