Currency Strength Meter: What Is It and How to Use It

What Is a Currency Strength Meter?

A Currency Strength Meter is a technical analysis indicator that measures the relative strength of individual currencies in real-time.

It helps you determine which currencies are gaining or losing value across multiple forex pairs.

Instead of analyzing one pair at a time, the meter offers a broader view of the overall market sentiment, showing you how strong or weak a currency is when compared to others.

Currency Strength Meter vs. Traditional Indicators

Traditional indicators like RSI or MACD analyze the price action of a single currency pair. In contrast, a currency strength meter evaluates multiple pairs simultaneously, giving you a macro perspective of the market.

Why Use A Currency Strength Meter

Using a currency strength meter helps you:

• Identify strong and weak currencies at a glance

• Avoid low-volatility pairs with unclear trends

• Confirm trade entries and exits with confidence

• Filter out false signals from traditional indicators

• Save time by avoiding manual analysis of dozens of charts

How Does It Work?

Currency strength meters rely on real-time market data to determine how strong or weak a currency is by analyzing its performance across various forex pairs.

Calculating Strength Based on Multiple Currency Pairs

The tool measures each currency’s performance against others. For example, to determine USD strength, it may analyze:

• EUR/USD

• GBP/USD

• AUD/USD

• USD/JPY

• USD/CAD

It aggregates this data into a relative currency strength index, often on a scale from 0 (weakest) to 10 (strongest).

Common Formulas or Indicators Used

Some meters use formulas based on:

• Moving Averages: Measures trends over time

• RSI (Relative Strength Index): Evaluates overbought/oversold levels

• Rate of Change (ROC): Captures momentum shifts

These are calculated across multiple pairs, then averaged to give a composite strength score.

Real-time vs. Delayed Data Feeds

Real-time currency strength meters update with every tick, offering instant insight into shifting market dynamics.

Delayed meters use historical data (such as hourly updates), which may lead to lagging signals.

For day trading or scalping, real-time currency strength meters are highly recommended.

How to Read a Currency Strength Meter

Understanding how to read a currency strength meter is essential for making smart trading decisions.

While the interface may vary from one tool to another, most meters follow the same logic: they rank currencies based on relative strength or weakness using real-time or near real-time data.

Basic Layout of a Currency Strength Meter

Most meters display the strength of major currencies such as USD, EUR, GBP, JPY, AUD, CAD, CHF, and NZD. Each currency is assigned a strength score or bar level, typically on a scale from 0 (very weak) to 10 (very strong).

Some may use color-coded bars or graphs:

• Red or low bars = Weak currency

• Green or high bars = Strong currency

• Yellow or mid-level = Neutral or consolidating

Others present the data numerically or as a currency index similar to the USDX (US Dollar Index).

Key Steps to Read and Interpret the Data

Here’s how to make sense of the numbers and turn them into trading insights:

1. Look for extremes.

   1. Currencies scoring 8 to 10 are considered strong.

   2. Currencies scoring 0 to 2 are considered weak.

   3. These currencies are ideal to trade against each other (e.g., Strong USD vs. Weak JPY).

2. Avoid similar strength pairings.

   1. If EUR and GBP both have scores of 6 or 7, a pair like EUR/GBP may lack direction.

   2. Stick to high contrast to identify clear trends.

3. Watch for shifting strength.

   1. A currency moving from 3 to 7 indicates rising momentum.

   2. This can signal a trend reversal or fresh breakout opportunity.

4. Confirm with chart analysis.

   1. Use technical indicators like moving averages or RSI to validate strength signals.

   2. Always align meter readings with price action or chart patterns for higher accuracy.

Real-World Example

Let’s say you open your real-time currency strength meter and see the following:

From this snapshot:

• USD/JPY is likely in a strong uptrend.

• AUD/USD could be trending downward.

• A pair like EUR/GBP may show limited volatility or sideways action.

This is how forex pair strength comparison helps you spot the best pairs to trade, based on currency correlation and momentum.

Can the Currency Score Be Out of 100?

Yes, sometimes the currency score is presented on a scale of 1-100 instead of 1-10.

In this format:

• 90–100: Extremely strong

• 70–89: Strong

• 50–69: Neutral or slightly strong

• 30–49: Neutral or slightly weak

• 0–29: Very weak

The scale (0–10 vs. 0–100) doesn’t affect the functionality, but you must understand the context of the scale to interpret it correctly. Always check:

1. What range your meter uses

2. How the strength is calculated (price movement, technical indicators, etc.)

3. Whether the meter uses absolute values or relative rankings

Absolute Values vs. Relative Rankings in a Currency Strength Meter

When reading a currency strength meter, it's important to know how the data is calculated and displayed. Most tools present either absolute values or relative rankings.

Absolute Values

These represent a currency's own strength, often shown on a scale (like 0–10 or 0–100).

They’re calculated using actual data from price movements or technical indicators. Absolute values help you understand how strong or weak a currency is on its own, regardless of others.

Relative Rankings

These show how a currency stacks up compared to others, ranking them from strongest to weakest. This method is great for quick forex pair strength comparisons, but can be misleading during low volatility or ranging markets.

For example:

If you see this ranking:

1. GBP

2. USD

3. AUD

4. ...

5. JPY

This doesn’t mean GBP is absolutely strong. It just means it's the strongest relative to others right now. Even if all currencies are weak, one will still rank first.

Which One Should You Use?

Ideally, both. Use absolute values to anticipate trend strength and set objective trading rules.

And, use relative rankings to choose the best currency pair combinations (strong vs. weak).

How to Use a Currency Strength Meter in Forex

Here’s a step-by-step guide to incorporate a strength meter into your trading:

• Check the strength values before placing a trade.

• Look for strong vs. weak currency pairs to trade trending setups.

• Avoid trading pairs with similar strengths (e.g., EUR = 6, GBP = 7).

• Use in conjunction with price action or other tools like Fibonacci or support/resistance levels.

• Monitor changes throughout the session to detect trend reversals or market sentiment shifts.

Currency Strength Trading Strategies

Once you’ve understood how to read a currency strength meter, it’s time to put that knowledge into action.

These currency strength trading strategies help you trade more confidently by combining strength data with technical analysis and market context.

Trend Identification Strategy (Strong vs. Weak Pairing)

One of the most popular approaches is the trend identification strategy, where traders pair the strongest currency with the weakest.

For example, if the USD is scoring 9 out of 10 and the JPY is scoring 2, the USD/JPY pair is likely in a strong uptrend.

By trading in the direction of this imbalance, you’re aligning with market momentum.

This strategy works best in trending markets and is especially effective when combined with tools like moving averages, trendlines, and price action analysis to confirm entry points.

Pullback Strategy

Another effective method is the pullback strategy, ideal for traders who want to avoid entering at the peak of a trend.

In this case, you identify a strong vs. weak currency pair, then wait for a temporary retracement or pullback. These are often spotted using Fibonacci levels, Bollinger Bands, or RSI indicators.

Once the pullback ends and the trend resumes, you can enter at a more favorable price.

This approach improves your risk-reward ratio and reduces the chances of getting caught in short-term reversals.

Reversal Trading Strategy

A more advanced yet rewarding approach is the reversal strategy, which is based on rapid changes in currency strength rankings.

If a previously strong currency begins to weaken or a weak one starts gaining momentum, it may signal an upcoming reversal.

For instance, if AUD moves from 3/10 to 7/10 within a few sessions, this could indicate shifting market sentiment.

Reversal strategies often work best when combined with divergence patterns on indicators like MACD or RSI, as well as breakouts from key support or resistance levels.

Common Mistakes to Avoid

When using a currency strength meter, make sure you avoid the below mistakes:

• Over-relying on the meter without checking fundamentals or price action.

• Ignoring correlation between pairs (e.g., EUR/USD and USD/CHF often move inversely).

• Using outdated or lagging data feeds.

• Trading during low-volatility periods where signals may be misleading.

Conclusion

A currency strength meter isn’t just a flashy add-on. It’s an effective forex strength indicator that can help you simplify your decision-making, spot clearer trends, and avoid costly mistakes.

By using it with proper analysis and discipline, you can gain a real edge in the markets.