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 July 2017
This month, we forecasted the highest-probability trade as long EUR/USD. The performance to date is nicely positive:
For the month of August, we expect that the best trades will be long EUR/USD and AUD/USD, and short USD/CAD.
Weekly Forecast 30th July 2017
Last week, we made no forecast, as there were no strong counter-trend movements.
This week, we again make no forecast, as there again were no strong counter-trend movements, except in the Swiss Franc which we currently find highly dangerous to trade.
This week has been dominated by relative strength in the Canadian Dollar and the British Pound, and relative weakness in the Swiss Franc and U.S. Dollar.
Volatility was lower than last week, with approximately 22% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be at a similar level or perhaps a little lower 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 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 1.1615 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 bounced bullishly off this level shortly after last Wednesday’s London Open, which is typically a good time to trade this currency pair,, printing a bullish engulfing candlestick that gave a very good long trade entry opportunity. This trade would have been a good winner with an excellent maximum reward to risk ratio greater than 4 to 1 so far.
USD/CAD
We had expected the level at 1.2570 might act as resistance, 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 bounced bearishly off this level during last Thursday’s New York session after rising strongly, printing a bearish pin candlestick that gave a very good short trade entry opportunity. This trade would have been a good winner with an excellent maximum reward to risk ratio greater than 5 to 1 so far.
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.