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:
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Monthly Forecast August 2018
For the month of August, we forecasted that the best trades will be short EUR/USD and short GBP/USD. The performance so far is as follows:
Currency Pair | Forecast Direction | Interest Rate Differential | Performance to Date |
EUR/USD | Short ↓ | 2.00% (2.00% - 0.00%) | +1.01% |
GBP/USD | Short ↓ | 0.75% (0.75% - 0.00%) | +1.93% |
Weekly Forecast 19th August 2018
Last week, we made 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 New Zealand Dollar, and relative weakness in the British Pound. Sentiment is mixed and unclear.
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: 0.7299, 0.7248, 0.7231, 0.7207 Resistance: 0.7322, 0.7348, 0.7382, 0.7479 |
EUR/USD | Support: 1.1353, 1.1308, 1.1296, 1.1150 Resistance: 1.1444, 1.1496, 1.1580, 1.1630 |
GBP/USD | Support: 1.2616, 1.2552, 1.2429, 1.2388 Resistance: 1.2818, 1.2842, 1.2920, 1.2975 |
USD/JPY | Support: 110.00, 109.07, 108.05, 107.49 Resistance: 110.65, 111.14, 111.86, 112.15 |
AUD/JPY | Support: 80.22, 79.35, 78.89, 76.59 Resistance: 81.28, 81.81, 81.86, 82.60 |
EUR/JPY | Support: 125.65, 124.71, 123.75, 120.74 Resistance: 128.49, 128.98, 130.05, 130.40 |
USD/CAD | Support: 1.3053, 1.2996, 1.2826, 1.2793 Resistance: 1.3114, 1.3281, 1.3327, 1.3383 |
USD/CHF | Support: 0.9904, 0.9885, 0.9827, 0.9679 Resistance: 0.9982, 1.0010, 1.0111, 1.0150 |
Let’s see how trading two of these key pairs last week off key support and resistance levels could have worked out:
GBP/USD
We had expected the level at 1.2818 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 returned to hit and strongly reject this level right at the start of the London session last Tuesday. This is often a great time to enter trades in the GBP/USD currency pair. The price immediately printed a bearish and very large outside candlestick which broke downwards 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 1.5 to 1 so far. A better result would have been achieved by using a tighter stop loss, as the entry candlestick was very large.
AUD/USD
We had expected the level at 0.7207 might act as support, 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 returned to hit and reject the level during the Asian session last Wednesday. This is often a very good “local” time of day to enter trades in currency pairs of Asian time-zone currencies such as the AUD/USD currency pair. The price immediately printed a bullish pin candlestick which broke upwards right away, which often signifies a good reversal is taking place. This trade was very nicely profitable, achieving a maximum positive reward to risk ratio of more than 6 to 1 so far.
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.