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 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%) | -0.61% |
GBP/USD | Short ↓ | 0.75% (0.75% - 0.00%) | +1.15% |
Weekly Forecast 26th 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 Euro, and relative weakness in the Japanese Yen. Sentiment remains 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: 0.7322, 0.7299, 0.7231, 0.7207 Resistance: 0.7382, 0.7479, 0.7510, 0.7580 |
EUR/USD | Support: 1.1535, 1.1496, 1.1444, 1.1400 Resistance: 1.1630, 1.1677, 1.1700, 1.1718 |
GBP/USD | Support: 1.2840, 1.2820, 1.2780, 1.2755 Resistance: 1.2934, 1.2975, 1.3044, 1.3084 |
USD/JPY | Support: 111.13, 110.68, 110.49, 110.04 Resistance: 111.86, 112.15, 112.57, 113.13 |
AUD/JPY | Support: 80.95, 80.59, 80.22, 79.35 Resistance: 81.81, 81.86, 82.60, 82.81 |
EUR/JPY | Support: 128.98, 128.24, 127.92, 126.92 Resistance: 130.05, 130.40, 131.21, 131.47 |
USD/CAD | Support: 1.2988, 1.2826, 1.2793, 1.2750 Resistance: 1.3062, 1.3114, 1.3281, 1.3327 |
USD/CHF | Support: 0.9679, 0.9500, 0.9384, 0.9248 Resistance: 0.9863, 0.9904, 0.9920, 0.9935 |
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 0.7299 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 settled just above this level right at the start of the week, before forming a bullish inside candlestick which broke up towards the start of the New York session on Monday. This is often a great time to enter trades in USD currency pairs. This trade was nicely profitable, achieving a maximum positive reward to risk ratio of more than 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.