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 us 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 2020
For the month of July, we made no forecast.
Weekly Forecast 26th July 2020
Last week, we forecasted that the EUR/USD currency pair rose in value. This was a good call, as the price rose by 2.06% over the past week.
This week, we again forecast that the EUR/USD currency pair will rise in value.
The Forex market showed a very slight increase in volatility compared to the previous week, with 27% of the important currency pairs and crosses moving by more than 1% in value last week. Volatility is likely to remain at a similar level over the coming week.
Last week was dominated by relative strength in the Canadian Dollar and the Euro and relative weakness in the U.S. Dollar.
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 us 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 107.43 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 how the price rejected this level near the start of last Monday’s Tokyo session, typically a great time to be trading currency pairs or crosses comprising the Japanese Yen, turning decisively bearish when a bearish triple inside candlestick formation broke down at the down arrow shown in the price chart below. This trade has been extremely profitable, achieving a maximum positive reward to risk ratio of almost 8 to 1 so far based upon the size of the entry candlestick structure.
EUR/JPY
We had expected the level at 122.19 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 near the end of last Monday’s New York session, turning decisively bullish with a small pin candlestick breaking up right away at the up arrow shown in the price chart below. This trade has been very profitable, achieving a maximum positive reward to risk ratio of almost 16 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.