The Forex market is showing a similar level of price activity compared to the previous week, with 52% of the important currency pairs and crosses moving by more than 1% in value over the past week.
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 June 2020
For the month of June, we forecast that the best trade will be long EUR/USD.
For the month of May, we forecasted that the best trade would be short USD/JPY. The final performance is shown in the table below:
Weekly Forecast 31st May 2020
Last week, we forecasted that the NZD/JPY currency cross was likely to fall in value. Unfortunately, it rose in value by 1.96%.
This week, we make no forecast as there were no strong counter-trend movements over the past week.
The Forex market is showing a similar level of price activity compared to the previous week, with 52% 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 or perhaps be a little higher over the coming week.
Last week was dominated by relative strength in the Canadian Dollar, 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 can be watched on the more popular currency pairs this week.
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 1.3732 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 how the price rejected this level during the first half of last Wednesday’s London session, turning bullish with a doji candlestick breaking up at the up arrow signaling the timing of the turn. This trade was profitable, achieving a maximum positive reward to risk ratio of approximately 4 to 1 based upon the size of the entry candlestick.
That is 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.