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:
· 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 February 2018
For the month of February, we forecasted that the best trades would be long EUR/USD and GBP/USD. The performance to date is as follows:
Weekly Forecast 25th February 2018
Last week, we made no forecast, as there were no strong counter-trend moves.
This week, we again make no forecast, as there have been no strong counter-trend moves.
This week has been dominated by relative strength in the U.S. Dollar, and relative weakness in the New Zealand Dollar.
Volatility was a lower than it was last week, with only 11% of the major or minor currency pairs changing in value by more than 1%. Volatility is likely to be higher next 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 84.85 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 at the start of the Tokyo session last Wednesday, which is typically a good time of day to enter trades in crosses of Asian currencies such as this one. A possible entry was signaled initially by the immediately subsequent large inside candle but it broke the wrong way and so gave no entry. However, a couple of candlesticks later, there was a bearish engulfing candlestick which could have been used as an entry point, marked by the down arrow within the chart below. This short trade has so far given a maximum reward to risk ratio of about 7 to 1, with the bullish pin candlestick very close to the support level at 83.26 giving an obvious and very profitable exit point.
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.