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 July 2017
This month, we forecasted the highest-probability trade as long EUR/USD. The performance to date is positive:
Weekly Forecast 9th July 2017
Last week, we made no forecast, as there were no strong counter-trend movements.
This week, we again make no forecast, as there again were no strong counter-trend movements.
This week has been dominated by relative strength in the Canadian and Australian Dollars, and relative weakness in the Euro.
Volatility was significantly higher than last week, with just over half of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be at a similar level over this coming week. You can trade our forecasts in a real or demo Forex brokerage account.
Key Support/Resistance Levels for Popular Pairs
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 1.2694 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work well. The H1 chart below shows the how the price bounced bullishly off this level after falling strongly, printing a bullish inside candlestick that gave a long trade entry opportunity. Although this was clearly a counter-trend trade, it could have been a winner with a maximum reward to risk ratios greater than 1 to 1. It is often wise to take fast profits when trading against a strong trend, as was the case here.
GBP/USD
We had expected the level at 1.2859 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work well. The H1 chart below shows the how the price initially hit this level around Monday’s London open – typically a good time to trade this currency pair - and formed a bullish engulfing candle, providing a possible long trade entry marked by the up arrow in the chart below. This long trade would have been a loser, but there was another opportunity a few hours later with a bullish doji candlestick rejecting the same level, shown by the second arrow in the chart below. This long trade could have given a good maximum reward to risk ratio of more than 2 to 1.
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.