Objective: I have a thesis that a certain currency will rise/fall vs everyone else due to certain reasons. I want to eliminate individual currency risk by taking positions involving said currency vs a basket of multiple currencies. Let's say I think South African rand will devalue. USD/ZAR, ZAR/JPY, GBP/ZAR, CHF/ZAR, EUR/ZAR are available to me. How do I build a proper basket? How do I weigh the allocations to each pair?
I see that you have a very challenging task in front of you. It is not only that you want to create a currency basket, but you would like also to include both technical and fundamental analysis to it. Why dont you just try it with technical analysis and applying weak – strong relations between it?
Can you fill this basket? Oh boy this hangover, had a dream I bought strange house. Did you feel the wind last night, swear I heard something falling on our building.
Seems in forex the most universal and a very significant issue is risk - I mean global risk tolerance. So assuming you're right about ZAR devaluing, in a risk-on situation pair it with USD: if risk-off, pair it with JPY (CHF would also work but is more highly correlated with the EUR). Clearly some further filtering might be needed to eliminate from the target currency list something with its own local issues - prime example right now would be GBP which is enmeshed with Brexit - little point buying GBP/ZAR if both currencies are crashing.