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 28th June 2020
Last week, we make 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 further decrease in volatility compared to the previous week, with only 15% of the important currency pairs and crosses moving by more than 1% in value last week. Volatility is likely to increase over the coming week.
Last week was dominated by relative strength in the Australian Dollar, and relative weakness in the Japanese Yen, although the numbers were so low as to be almost meaningless.
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:
USD/JPY
We had expected the level at 106.15 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 last Tuesday’s New York / London sessions overlap, typically a great time to be trading major currency pairs, turning decisively bullish with a pin candlestick breaking up right away at the down arrow shown in the price chart below. This trade has been profitable, achieving a maximum positive reward to risk ratio of more than 4 to 1 so far based upon the size of the entry candlestick.
USD/CHF
We had expected the level at 0.9427 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 last Tuesday’s New York / London sessions overlap, typically a great time to be trading major currency pairs, turning decisively bullish with a bullish engulfing candlestick breaking up right away at the down arrow shown in the price chart below. This trade has been profitable, achieving a maximum positive reward to risk ratio of more than 2 to 1 so far based upon the size of the entry candlestick structure.
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.