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 Forecasts April/May 2016
For the month of May, we forecast that the highest-probability trades will be long GBP/USD and USD/CAD.
Weekly Forecast 30th April 2017
Last week, we made no forecast, as there were no strong counter-trend movements except in GBP/AUD and we did not see this as likely to revert – it did not.
This week, we make no forecast, as again there were no strong counter-trend movements.
This week has been dominated by relative strength in the Euro, and relative weakness in the Japanese Yen.
Volatility was again higher than last week, with almost 70% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be even higher still 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 one of these key pairs last week off key support and resistance levels could have worked out:
We had expected the level at 1.0950 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 late during the Asian session last Wednesday, very close to the Frankfurt Open, which is typically a productive time of day to enter trades in this pair. There was a bearish outside candle providing an entry, marked by the down arrow shown in the chart below. An additional encouraging factor was that the price had made a swing high just a pip or so below the key level of 1.0950 some hours earlier. This short trade has given a respectable maximum reward to risk ratio of more than 2 to 1 to date, if the stop had been placed just above the swing high at the entry candlestick.
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.