This week we will 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 18 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 March 2021
For the month of March, we forecast that the USD/JPY currency pair will rise in value, while the EUR/USD currency pair will fall. The performance so far has been positive:
Weekly Forecast 21st March 2021
This week, we make no weekly forecast, as there were no strong counter-trend movements in the Forex market whatsoever last week.
The Forex market showed a very low level of volatility last week, with not one of the important currency pairs and crosses moving by more than 1% in value. Volatility is likely to remain relatively low over the coming week.
Last week was dominated by relative strength in the Swiss franc, and relative weakness in the euro, but the absolute values were so small as to make this somewhat meaningless.
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 reversals from two of last week’s key levels would have worked out:
AUD/USD
We had expected the level at 0.7774 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 with a bearish engulfing candlestick structure early in last Monday’s Asian session, marked by the down arrow in the price chart below, which is typically a good time to be trading currency pairs of pairs such as this one which include Asian currencies such as the Australian Dollar. This trade was profitable, achieving a maximum positive reward to risk ratio of more than 2 to 1 based upon the size of the entry candlestick.
USD/JPY
We had expected the level at 108.83 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 with a bullish inside candlestick early in last Tuesday’s New York session, marked by the up arrow in the price chart below, which is typically a good time to be trading major currency pairs such as this one. This trade has been very profitable, achieving a maximum positive reward to risk ratio of more than 1 to 1 based upon the size of the entry candlestick structure.
