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 March 2016
This month we forecasted that the highest-probability trades will be long USD/CAD and short NZD/USD. The performance so far is as follows:
Weekly Forecast 19th March 2017
Last week, we made no forecast, as there were no strong counter-trend movements.
This week, we again make no forecast, as there were again no strong counter-trend movements.
This week has been dominated by relative strength in the Japanese Yen and British Pound, and relative weakness in the U.S. Dollar.
Volatility was lower than last week, with only one third of the major and minor currency pairs changing in value by more than 1%. It is unclear how volatility is likely to register 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:
GBP/USD
We had expected the level at 1.2133 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 hit this level early during the London session last Tuesday, which can be a great time for entries in this currency pair. Entry was signaled by the bullish pin candle which formed immediately after the price was hit, marked by the up arrow within the chart below. This long trade has given an excellent maximum reward to risk ratio of more than 5 to 1 to date, if the stop had been placed just below the swing low at the entry candlestick.
AUD/JPY
We had expected the level at 87.43 might act as resistance, 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 hit this level close to the Tokyo open last Wednesday, which can be a very significant time of day for Asian-based currency crosses such as this one. Entry was signaled by the bearish inside candle and engulfing candle combination, which formed immediately after the price was hit, marked by the down arrow within the chart below. This short trade has given an excellent maximum reward to risk ratio of more than 4 to 1 to date, if the stop had been placed above the swing high at the entry candlesticks.
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.