This week we’ll begin with our monthly and weekly forecasts of the currency pairs worth watching. The first part of our forecast is based upon our research of the past 11 years of Forex prices, which show that the following methodologies have all produced profitable results:
Trading the two currencies that are trending the most strongly over the past 3 months.
Assuming that trends are usually ready to reverse after 12 months.
Trading against very strong counter-trend movements by currency pairs made during the previous week.
Buying currencies with high interest rates and selling currencies with low interest rates.
Let’s take a look at the relevant data of currency price changes and interest rates to date, which we compiled using a trade-weighted index of the major global currencies:
Monthly Forecast April 2016
This month, we forecasted that the AUD, CAD and EUR would rise in value against the USD. The results so far are positive overall:
Weekly Forecast 24th April 2016
Last week, we made no forecast.
This week, we make no forecast, as there were no strong truly counter-trend moves over this past week.
This week has seen continuing strength in the Canadian and Australian Dollars and U.S. Dollars and the British Pound, and weakness primarily in the Japanese Yen as well as the Euro and Swiss Franc. Regarding the Australian and Canadian Dollars, these moves are in-trend.
Volatility was similar to the previous week, with about 62% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be higher over this coming week.
You can trade our forecasts in a real or demo Forex brokerage account.
Key Support/Resistance Levels for Popular Pairs
At the FX Academy, we teach that trades should be entered and exited at or very close to key support and resistance levels. There are certain key support and resistance levels that should be watched on the more popular currency pairs this week, which might result in either reversals or breakouts:
Let’s see how trading two of these key pairs last week off key support and resistance levels could have worked out:
USD/CAD
We had expected the level at 1.2592 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H4 chart below shows how during last week this level acted as very reliable support almost to the pip, in spite of the very bearish long-term trend. As soon as it was hit a bullish inside candle was formed which immediately broke to the upside. However the maximum reward so far would only be about 98 pips, a reward to risk ratio of only 1.5 to 1 if the stop had been placed under the candlestick low.
EUR/JPY
We had expected the level at 121.83 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H4 chart below shows how during last week this level acted as very reliable support almost to the pip, in spite of the very bearish long-term trend. As soon as it was hit a bullish engulfing candle was formed following a doji candle which immediately broke very strongly to the upside. The maximum reward so far would be about 287 pips, a good reward to risk ratio of 3 to 1 if the stop had been placed under the candlestick low.
You can trade our forecasts in a real or demo Forex brokerage account to test the strategies and strengthen your self-confidence before investing real funds.