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 March 2018
For the month of March, we forecasted that the best trades would be short USD/JPY and long EUR/USD. The performance to date is as follows:
Currency Pair | Forecast Direction | Interest Rate Differential | Performance to Date |
EUR/USD | Long ↑ | -1.50% (0.00% - 1.50%) | -0.10% |
USD/JPY | Short ↓ | 1.60% (1.50% - -0.10%) | -1.04% |
Weekly Forecast 11th March 2018
Last week, we made no forecast, as there were no strong counter-trend moves.
This week, we forecast that the AUD/JPY and CAD/CHF currency crosses will both fall in value, as they have just experienced very strong counter-trend movements.
This week has been dominated by relative strength in the Australian Dollar, and relative weakness in the Swiss Franc.
Volatility was lower than it was last week, with approximately 41% of the major or minor currency pairs changing in value by more than 1%. Volatility is likely to be lower still 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:
Currency Pair | Key Support / Resistance Levels |
AUD/USD | Support: 0.7774, 0.7696, 0.7640, 0.7629 Resistance: 0.7869, 0.7935, 0.7995, 0.8043 |
EUR/USD | Support: 1.2284, 1.2252, 1.2005, 1.1885 Resistance: 1.2369, 1.2435, 1.2459, 1.2500 |
GBP/USD | Support: 1.3824, 1.3759, 1.3657, 1.3559 Resistance: 1.3940, 1.4168, 1.4330, 1.4435 |
USD/JPY | Support: 106.44, 105.86, 103.34, 100.03 Resistance: 108.05, 109.76, 110.52, 111.20 |
AUD/JPY | Support: 83.26, 82.93, 82.05, 81.50 Resistance: 83.80, 84.85, 86.00, 87.46 |
EUR/JPY | Support: 130.61, 130.52, 129.12, 128.40 Resistance: 132.11, 134.16, 134.88, 136.00 |
USD/CAD | Support: 1.2785, 1.2732, 1.2669, 1.2605 Resistance: 1.2890, 1.2909, 1.3049, 1.3082 |
USD/CHF | Support: 0.9488, 0.9423, 0.9327, 0.9318 Resistance: 0.9574, 0.9665, 0.9732, 0.9816 |
Let’s see how trading one of these key pairs last week off key support and resistance levels could have worked out:
AUD/JPY
We had expected the levels at 81.50 and 83.26 might act as support and resistance, as they had both 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 the support level at 81.50 and bounced bullishly right away at the start of the London session last Monday, which is typically an effective time of day to enter Forex trades. A possible entry was signaled initially by the immediately subsequent large engulfing candlestick, marked by the up arrow within the chart below. The next day, just after the start of the New York session, the trade was well in profit, and gave a short entry signal by bouncing bearishly off the key resistance level identified at 83.26, with another bearish engulfing candlestick, marked by a down arrow. This short trade gave a maximum reward to risk ratio of a little more than 2 to 1. It was profitable to profit in both directions on this currency cross this week.
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.