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 16 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 November 2017
For the month of November, we forecasted that the best trades would be long USD/JPY, short EUR/USD, and long USD/CHF. The performance to date is as follows:
Weekly Forecast 12th November 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 British Pound and Canadian Dollar, and relative weakness in the U.S. Dollar. However, the movements are relatively small, so may not be significant.
Volatility was again surprisingly low, with not a single major or minor currency pairs changing in value by more than 1%. Volatility is likely to be higher 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:
AUD/USD
We had expected the level at 0.7696 might act as resistance, and the level at 0.7629 as support. This week, these levels marked both the high and low, providing two profitable price action trades in both directions shown at the up and down arrows marked in the chart below! Note how these “flipping” levels can work well. The H1 chart below shows how after holding the wick of the hourly candlestick, the price bounced bearishly off 0.7696 and fell sharply to the support level at 0.7629. The price then bounced bullishly, with a bullish pin candlestick rejecting the level. The maximum reward to risk ratio reached in the short trade was about 2 to 1, while the later long trade gave almost 4 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.