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 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 October 2019
Last week, for the remainder of the month of October, we forecasted that the best trades would be long GBP/USD and long GBP/JPY. The performances to date are as follows:
Weekly Forecast 20th October 2019
Last week, we made no weekly forecast as although there were a few strong countertrend movements, we felt their quality is not good enough to trade. This week we make no forecast, as there were no suitably strong countertrend moves.
The Forex market has become a little less active, with 44% of the important currency pairs and crosses moving by more than 1% in value over the past week. Volatility is likely to remain at a similar level over the coming week.
Last week was dominated by relative strength in the British Pound, and relative weakness in the U.S. Dollar.
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:
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 108.07 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows how during last Monday’s London session, the price bounced strongly off that level, forming a bullish inside candle marked by the up arrow, which immediately broke up. This trade has given a maximum reward to risk ratio of a little more than 3:1 so far.
That’s all for 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.