This week I will begin with my monthly and weekly Forex forecast of the currency pairs worth watching. The first part of my forecast is based upon my research of the past 20 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 6 months.
- Trading against very strong weekly counter-trend movements by currency pairs made during the previous week.
- Carry Trade: Buying currencies with high interest rates and selling currencies with low interest rates.
Let us 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 October 2023
For the month of October, I forecasted that the USD/JPY currency pair would gain in value.
The result so far is as follows:
Weekly Forecast 29th October 2023
Last week, I gave no weekly forecast, as there were no strong counter-trend price movements.
This week, I again have no forecast.
Directional volatility in the Forex market decreased last week with 22% of the most important currency pairs fluctuating over the week by more than 1%. Volatility is likely to increase over the coming week, due mostly to the scheduled FOMC meeting, and if the war in the Middle East widens, it will extend even further.
Last week was dominated by relative strength in the US Dollar, and relative weakness in the Canadian Dollar.
You can trade my forecasts in a real or demo Forex brokerage account.
Key Support/Resistance Levels for Popular Pairs
I 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 can be monitored on the more popular currency pairs this week.
Let us see how trading two of these key pairs last week off key support and resistance levels could have worked out:
USD/JPY
I had expected the level at ¥149.46 might act as support in the USD/JPY currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level right at the start of last Tuesday’s London session (which can be a great time to enter trades in major currency pairs like this one) with a bullish pin bar, marked by the up arrow in the price chart below signaling the timing of this bullish rejection. This trade was very profitable, giving a maximum reward to risk ratio of more than 6 to 1 based upon the size of the entry candlestick.
USD/CHF
I had expected the level at $0.8898 might act as support in the USD/CHF currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level right at the start of last Tuesday’s London session (which can be a great time to enter trades in major currency pairs like this one) with a large bullish engulfing bar, marked by the up arrow in the price chart below signaling the timing of this bullish rejection. This trade was profitable, giving a maximum reward to risk ratio of about 3 to 1 based upon the size of the entry candlestick.
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