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 forecasted that the best trade would be long EUR/USD. The performance so far has been positive, as shown in the table below:
Weekly Forecast 14th June 2020
Last week, we made no forecast as there were no strong counter-trend movements sharply against any dominant trends over the past week.
This week, we again make no forecast.
The Forex market showed a decrease in volatility compared to the previous week, with only 59% of the important currency pairs and crosses moving by more than 1% in value last week. Volatility is likely to remain at a similar level over the coming week.
Last week was dominated by relative strength in the Japanese Yen, and relative weakness in the Australian 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 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 1.2624 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 Tuesday’s London session, turning bullish with an inside candlestick breaking up at the up arrow signaling the timing of the turn. This trade has been profitable, achieving a maximum positive reward to risk ratio of approximately 4 to 1 so far based upon the size of the entry candlestick structure.
EUR/JPY
We had expected the level at 120.24 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 near the beginning of last Friday’s Tokyo session, turning bullish with a bullish outside candlestick breaking up at the up arrow signaling the timing of the turn. This trade has been profitable, achieving a maximum positive reward to risk ratio of approximately 3 to 1 so far based upon the size of the entry candlestick structure.
