Currency Strength | The Essential Technical Analysis Guide For Traders

January 11, 2021
This FX 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.
Currency Strength | The Essential Technical Analysis Guide For Traders


What Determines the Strength of a Currency?

A wide range of essential factors determines currency strength. Yet, like buying anything, currency strength gets determined by demand and supply.

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. Many 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 country to how stable or safe its currency appears to be.

Currency strength meter MT4

As a simple guide, A currency strength meter uses visual data to show currencies that are stable or weak.

Currency strength indicator

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

Depending on the indicator, the stats may get based on the ROC (rate of change). also, 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 get believed to be the Norwegian Krone. The reasons for this stability is down to the Norwegian government and central bank. Rather than its use in international trading.
First, Norway’s central bank has one of the world’s highest capital ratios, with 25%. Second, 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 market analysis

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 gets estimated that 80% of the country’s revenue comes from the oil industry. Oil production here is the easiest and cheapest in the world. This means for now the Kuwait Dinar has a tremendous amount of currency strength.
Yet, with so much of its value tied up in oil production. This currency can’t get considered as safe or stable as the Norwegian Krone.
Close runners up for the best currency strength title 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 countries that use the Dollar, like Ecuador, Zimbabwe and El Salvador. These countries will be at a significant disadvantage.

Where is the Dollar worth the most?

Currently, countries where USD worth the most are: 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 get traded all over the world. The main reason for its prevalence is that the US has the world’s biggest economy. Second, it is the most often held currency in reserve by central banks. Banks for global transactions (accounting for 63% of reserved money across the world.
Most valuable international commodities, like oil and copper, are all priced in USD. It is the easiest currency to buy such important products.

The Euro

As the currency of all the EU countries, the Euro (eurusd) is the second most traded currency across the world. Every day around $800 million worth of Euros gets traded. A far cry from USD’s trillions but a respectable amount regardless.
Its popularity is due to the scale. In which it gets used throughout the eurozone and countries that trade with them. Besides, 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 due to Japan’s success as a manufacturing powerhouse. Yet, China is a close competitor of Japan’s manufacturing. So changes to either currency can affect the price of the goods they are selling. Thus, 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. known as “Ausy”, this pair has become one of the most traded on FOREX in recent years. , AUD/USD is among the 5 most traded pairs in the currency exchange market.

The Swiss Franc

The currency pair EUR/CHF (Euro and Swiss franc) are among the most traded currency pairs. It is actually known as a cross-currency pair. Meaning that the pair gets traded directly. Instead of becoming a base currency like the dollar first.

The Canadian Dollar

Finally, one of the most important elements in the USD/CAD analysis is the oil price. Indeed, Canada is one of the major oil-producing countries. And its economy gets on the exploitation of this natural resource.

How to convert pound sterling to US Dollars

When converting a currency, remember that the exchange rates changes 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. By using a simple equation that multiplies the amount of GBP by the Dollar price. 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 maths yourself, there are plenty of online currency trading conversion tools.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.

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