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 April 2016
This month we forecasted that the highest-probability trades will be long GBP/USD and short USD/JPY. The overall performance to date is negative:
Weekly Forecast 16th April 2017
Last week, we made no forecast.
This week, we make no forecast, as there were no strong counter-trend movements.
This week has been dominated by relative strength in the Japanese Yen, and relative weakness in the U.S. Dollar.
Volatility was a little higher than last week, with one third of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be relatively unchanged over this coming week.
You can trade our forecasts in a real or demo Forex brokerage account.
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 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:
EUR/USD
We had expected the level at 1.0572 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 the how the price hit this level early during the Asian session last Monday, which is typically not a productive time of day to trade this pair. At this time, there was a bullish engulfing candle providing an entry, marked by the first up arrow, but it was the second possible entry at the New York open provided by the candle which was both an inside candle and a doji that provided the high-quality and profitable trade entry. This long trade has given an excellent maximum reward to risk ratio of more than 6 to 1 to date, if the stop had been placed just below the swing low at the second candlestick. Such a profit would have more than paid for the initial losing trade during the Asian session, if it had been taken.
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.