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 March 2016
This month, we forecasted that the AUD would rise in value against the USD. The performance so far has been nicely positive:
Weekly Forecast 20th March 2016
Last week, we forecasted that GBP/NZD would fall in value. It did fall slightly, by 0.07%.
This week, we make no forecast, as there were no strong counter-trend moves over this past week.
This week has seen strength primarily in the Japanese Yen and Canadian Dollar, and weakness in the U.S. Dollar. Broadly speaking, there is a continuing improvement in global risk sentiment which has seen risk and commodity currencies, as well as stocks and crude oil, rise in value.
Volatility was much less compared to the previous week, with 74% of the major and minor currency pairs changing in value by less than 1%. Volatility is likely to be even lower this coming week.
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 two of these key pairs last week off key support and resistance levels could have worked out:
EUR/USD
We had expected the level at 1.1068 might act as support, and also that the level at 1.1337 might act as resistance, as both had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H4 chart below shows how during last week these levels perfectly captured almost to the pip the high and low of the week. Unfortunately on the H4 chart the candlesticks did not provide very obvious entry signals in either direction.
USD/JPY
We had expected the level at 111.00 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. It is also a round number which can act to increase the strength of the level. The H4 chart below shows how during last week the price fell to this level before turning around over several hours, with the bullish engulfing candle marked by the upwards arrow finally providing a long entry signal. This trade would still be in play, but caution should be taken as there is a fairly strong longer-term trend in the opposite (downwards) direction.
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.