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 August 2018
For the month of August, we forecast that the best trades will be short EUR/USD and short GBP/USD. For the month of July, we forecasted that the best trades would be long USD/JPY and long USD/SEK. The final performance was as follows:
Currency Pair | Forecast Direction | Interest Rate Differential | Performance to Date |
USD/SEK | Long ↑ | 2.50% (2.00% - -0.50%) | -1.71% |
USD/JPY | Long ↑ | 2.10% (2.00% - -0.10%) | +1.01% |
Weekly Forecast 5th August 2018
Last week, we make no forecasts, 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 Swiss Franc and Canadian Dollar, and relative weakness in the Euro.
You can trade our forecasts in a real or demo Forex brokerage account.
Previous Monthly Forecasts
You can view the results of our previous monthly forecasts here.
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: 0.7385, 0.7348, 0.7309, 0.7260 Resistance: 0.7438, 0.7479, 0.7510, 0.7580 |
EUR/USD | Support: 1.1496, 1.1467, 1.1447, 1.1372 Resistance: 1.1602, 1.1630, 1.1677, 1.1700 |
GBP/USD | Support: 1.2951, 1.2920, 1.2858, 1.2818 Resistance: 1.3044, 1.3084, 1.3117, 1.3174 |
USD/JPY | Support: 111.06, 110.80, 110.55, 110.00 Resistance: 111.39, 111.86, 112.15, 112.57 |
AUD/JPY | Support: 81.86, 81.81, 81.28, 80.42 Resistance: 82.54, 82.81, 83.45, 84.54 |
EUR/JPY | Support: 128.49, 127.18, 126.35, 125.60 Resistance: 128.98, 129.12, 130.05, 130.40 |
USD/CAD | Support: 1.2826, 1.2793, 1.2750, 1.2650 Resistance: 1.3041, 1.3085, 1.3136, 1.3281 |
USD/CHF | Support: 0.9922, 0.9905, 0.9885, 0.9827 Resistance: 0.9948, 0.9953, 0.9978, 1.0010 |
Let’s see how trading one of these key pairs last week off key support and resistance levels could have worked out:
USD/CAD
We had expected the level at 1.3000 might act as support, while the level at 1.3085 might act as resistance, as both 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 returned to hit and reject the support at 1.3000 during the New York session last Monday. This is often a very good “local” time of day to enter trades in currency pairs of north American currencies such as the USD/CAD currency pair. The price immediately printed a bullish outside candlestick which broke upwards right away, which often signifies a good reversal is taking place. This trade was nicely profitable, achieving a maximum positive reward to risk ratio of more than 3 to 1, hitting its peak upon a spike beyond the next resistance level at 1.3085. This shows how opposing levels can sometimes be used to signal exits from trades. This bearish reversal at 1.3085 could also have been used to enter a short trade, although the stop loss was very wide.
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.