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 11 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 November 2015
This month we forecast that the most probable movements are short AUD/JPY and AUD/NZD.
Weekly Forecast 1st November 2015
Last week, we forecast that the EUR/AUD currency cross would rise in value. This forecast performed positively, as shown below:
This week, we make no forecast, as there were no strong counter-trend moves last week.
This week saw continuing strength in the NZD, and significant weakness in the CHF and AUD.
Volatility was lower than the previous week. Approximately one-third of the major and minor currency pairs changed in value by more than 1%. Volatility is likely to be higher this this week as there are central bank events scheduled for the USD, AUD and the GBP.
You can trade our forecasts in a real or demo Forex brokerage account.
Key Support/Resistance Levels for Popular Pairs
At the FX Academy, 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:
GBP/USD
We had expected the level at 1.5381 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H4 chart below shows how the price jumped up to touch this level during the London / New York overlap last Monday, rejecting it almost to the pip and forming a bearish inside candle marked at (1). The price took a while to begin falling, when it formed a new bearish engulfing candle the following day, marked at (2). It would have been a nicely profitable trade with quite a good reward to risk profile, although knowing when to exit would have been difficult.
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.