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Currency Strength | The Essential Technical Analysis Guide For Traders


March 3, 2020
Currency Strength | The Essential Technical Analysis Guide For Traders

This Forex rates analysis guide for traders explains the causes of changes in currency strength and the current state of major currencies like the USD and GBP. It also details how to analyse currency strength and compare it against others.

What determines the strength of a currency?

Currency strength is determined by a wide range of essential factors. However, at its core, just like purchasing anything, currency strength is determined by demand and supply on the global market.

To answer the questions, what does strong currency mean?
We can take the USD, for example. This currency is worth more than the Indian Rupee. This is because the demand for USD is greater than the supply. Lots of Indian companies want to use USD for international Forex exchange market trading; so, the demand for USD remains strong.

Any factors that will affect the demand for a currency, from interest rates and economic policy in the currency’s country to how stable or safe the currency it appears to be.

Currency strength meter MT4

As a simple, easily-to-digest guide, A currency strength meter uses visual data representation to demonstrate which currencies are currently stable, and which ones are weak.

Currency strength indicator

A currency indicator reads signals that help reveal the currency strength when compared to others. In this way, it enables you to understand any conflicting Forex market trends.

Depending on which indicator you use, the stats may be based on the ROC (rate of change), RSI (relative strength index), CCI (commodity change index) or another correlation.

What is the safest foreign currency?

Today, the safest major currency in the world is widely believed to be the Norwegian Krone. The reasons for this currency’s stability is really down to the Norwegian government and central bank, rather than its use in international trading.

Firstly, Norway’s central bank has one of the highest capital ratios in the world with 25%. Secondly, as Norway is not part of a group of countries like the EU, it is not tied to other countries’ liabilities.

This independence means the Krone’s value has no risk of plummeting due to other countries’ financial issues.

What is the strongest foreign currency?

currency strength

Which currency is strong today? The strongest currency now on average is the Kuwaiti Dinar which is currently priced at $3.29 to 1 and £2.56 to 1. Kuwait is a tax-free country with ample natural resources, oil.

It is estimated that 80% of the country’s revenue comes from the oil industry, as petroleum production here is the easiest and cheapest in the world. This means for now the Kuwait Dinar has a tremendous amount of currency strength.

However, with so much of its value tied up in oil production, this currency can’t be considered as safe or stable as the Norwegian Krone.

Close runners up for the title of best currency strength include the Bahrain Dinar ($2.66 to $1) and the Oman Rial ($2.60 to $1) for similar reasons as Kuwait.

Who is hurt by a weaker dollar?

If the value Dollar’s currency strength falls, so will its purchasing power. It will increase the cost of oil and gas, which will affect everyone as this extra cost is likely to trickle down to us consumers.

Also, other poorer countries that use the Dollar, like Ecuador, Zimbabwe and El Salvador, will be at a significant disadvantage.

Where is the Dollar worth the most?

Currently, the countries where the Dollar is worth the most are as follows: Argentina, Hungary, South Korea and Thailand and South Africa.

The top three most traded currencies:

The US Dollar

USD is the most traded currency in the world and every day an average of

$2.2 trillion is traded all over the world. The main reason for its prevalence is that the US has the world’s biggest economy. Secondly, it is the currency that is most often held in reserve by central banks and commercial banks for international transactions (accounting for 63% of reserved money across the world.

Lastly, most valuable international commodities, like oil and copper, are all priced in USD, so it is the easiest currency to use for buying such important products.

The Euro

As the currency of nearly all the countries in the EU, the Euro (eurusd) is the second most traded currency across the world. Every day around $800 million worth of Euros are traded, a far cry from the trillions of USD but a respectable amount regardless.

Its popularity is due to the scale in which it is used throughout the eurozone and countries that trade with them. In addition, it is also the second biggest reserve currency (accounting for 20% of the all reserve money globally)

The Japanese Yen

The Japanese Yen is the third most traded currency globally, equating a daily average traded volume of around $550 million. Like the USD and GBP, it is also a big reserve currency, third in the world and account for 4.9% of global reserves.

Its popularity is mainly due to Japan’s success as a manufacturing powerhouse. However, China is a close competitor of Japan’s manufacturing, so changes to either currency can affect the price of the goods they are selling and therefore, the popularity of their currencies for traders.

The Australian Dollar

AUD/USD represents the currency pair composed of the Australian dollar and the US dollar. Popularly known as “Ausy”, this pair has in recent years become one of the most traded on FOREX. Specifically, AUD/USD is among the 5 most traded pairs in the currency exchange market.

The Swiss Franc

The foreign currency pair euro and Swiss franc are one of the most popular currency pairs for pips traders in the foreign exchange market. It is actually known as a cross-currency pair, which means that the pair is traded directly instead of becoming a base currency like the dollar first.

The Canadian Dollar

Finally, one of the most important elements to be taken into account in the USD/CAD analysis is undoubtedly the price of oil. Indeed, Canada is one of the major oil-producing countries and its economy is based mainly on the exploitation of this natural resource.

How to convert pound sterling to US Dollars

When converting any currency, it is important to remember that the exchange rates can change hourly; so it is best to keep a close eye on what is happening to find the right time to make the exchange. Now, the strong pound is equal to $1.28.

Once you know the current exchange rate you can work out how much money you can buy using a simple equation that multiplies the amount of GBP by the price of the Dollar, e.g. 100 x 1.28 will give you the amount of USD you will receive for a £100 investment.

Brtish Pound to EUR Conversion 

Converting British pound to EUR or GBPEUR can be done in much the same way. Currently, the weak only pound is worth €1.16. The equation (100 x 1.16) means £100 is equal to €128.25.

As an alternative to doing the math’s yourself, there are plenty of online currency trading conversion tools.

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