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:
* 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.
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 September 2016
Weekly Forecast 18th September 2016
Last week, we made no forecast.
This week, we make no forecast, as there were no strong counter-trend moves.
This week has been dominated again by strength in the Japanese Yen, and weakness in the British Pound.
Volatility was slightly higher than it was during the previous week, with approximately 40% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be much greater over this coming week, which will be dominated by central bank actions from the U.S. Federal Reserve, the Bank of Japan, and the Reserve Banks of Australia and New Zealand.
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 one of these key pairs last week off key support and resistance levels could have worked out:
We had expected the level at 113.95 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows the how the price initially hit this level around the Tokyo open last Tuesday, a time which can be crucial for currency crosses or pairs involving the Japanese Yen such as the EUR/JPY currency pair. The price reversed immediately with a bullish doji candle marked by the green up arrow in the chart. This was the low price of the week. This long trade gave a maximum reward to risk ratio of more than 9 to 1 so far, if the stop had been placed just below the swing low. Strangely, exactly the same thing happened during the previous week, same time of day, candlestick type etc.
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.