How to Analyze Currency Strength

Currency strength analysis helps you find the best pairs to trade by identifying which currencies are strong and which are weak. This tutorial walks you through a practical workflow using FX Power NG, IX Power, and Power Candles.

Step 1: Identify the Strongest and Weakest Currencies

Open FX Power NG on any chart. The indicator shows 8 currency lines (USD, EUR, GBP, JPY, CHF, AUD, NZD, CAD) plus optional Gold.

Look for clear separation between the lines:

  • Lines at the top represent strong currencies
  • Lines at the bottom represent weak currencies
  • Lines clustered in the middle indicate no clear trend - avoid those currencies

The wider the gap between the strongest and weakest currency, the better the trading opportunity.

Step 2: Check the Delta

Once you have identified a strong and a weak currency, open the chart of that pair. FX Power shows a Delta line that represents the strength difference between the two currencies.

  • High positive Delta (e.g., above 40) = the base currency is significantly stronger than the quote currency. This confirms a BUY setup.
  • High negative Delta (e.g., below -40) = the base currency is significantly weaker. This confirms a SELL setup.
  • Delta near zero = no clear edge. Wait for separation.

You can also use the Symbols Panel in FX Power to see Delta values for all pairs at once without switching charts.

Step 3: Visual Confirmation with Power Candles

Add Power Candles to the same chart. Power Candles colors each candle based on the underlying currency strength:

  • Dark green candles = strong bullish momentum (high delta)
  • Light green = moderate bullish
  • Gray = neutral, no clear momentum
  • Light red = moderate bearish
  • Dark red = strong bearish momentum

What you want to see: a sequence of green candles getting darker (strengthening trend) or a transition from gray to green (new trend forming).

If FX Power shows strong separation but Power Candles are gray or mixed, the move may be fading - proceed with caution.

Step 4: Non-Forex Instruments

For Gold, indices (DAX, S&P500), or crypto (Bitcoin), use IX Power alongside FX Power:

  • IX Power shows the strength of the instrument itself (single line)
  • FX Power shows the strength of the counter-currency (usually USD)

Example for XAUUSD:

  • IX Power shows Gold strength at +25 (strong)
  • FX Power shows USD weakness at -15 (weak)
  • This combination favors a XAUUSD long position

Always use the same Calculation mode on both indicators (e.g., both on H8) for consistent signals.

Step 5: Trend Direction Confirmation

Optionally, add FX Trend as a final filter. FX Trend shows the trend direction across multiple timeframes simultaneously.

If FX Power shows strong EUR and weak USD, and FX Trend confirms an uptrend on M15, H1, and H4 for EURUSD, the setup is well-aligned. If FX Trend shows conflicting directions across timeframes, the strength may not translate into a clean move.

Choosing the Right Calculation Mode

The Calculation mode in FX Power and IX Power determines the time window for strength measurement:

Trading style Recommended mode What it measures
Scalping (M1-M15) H1 or H2 Last 1-2 hours of strength
Day Trading (M15-H1) H4 or H8 (default) Last 4-8 hours
Swing Trading (H1-H4) D1 Daily strength
Position Trading (D1+) W1 or longer Weekly strength

You can run multiple FX Power instances on the same chart with different modes (e.g., H4 and D1) by assigning different Instance IDs. This lets you see both short-term and medium-term strength side by side.

Practical Example

Let us say your FX Power panel shows:

  • AUD at the top with a value of +30
  • JPY at the bottom with a value of -25

You open AUDJPY. The Delta shows +55 - a very strong reading. Power Candles on the chart display dark green candles for the last several bars. FX Trend confirms an uptrend on H1 and H4.

This is a textbook strength-based setup: strong currency vs. weak currency, confirmed by momentum on the chart and aligned trend direction.

Key Takeaways

  • Always trade the strongest currency against the weakest - this gives you the highest probability setup
  • Use the Delta value as your primary filter. Below 30, the edge is marginal. Above 40, conditions are favorable.
  • Power Candles provide instant visual confirmation without needing to interpret numbers
  • For non-forex instruments, combine IX Power (instrument strength) with FX Power (counter-currency strength)
  • Match Calculation mode to your trading style - shorter modes for scalping, longer modes for swing trading