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 April 2021
For the month of April, we again forecasted that the USD/JPY currency pair will rise in value, while the EUR/USD currency pair will fall. The performance so far is negative:
Weekly Forecast 18th April 2021
Last week, we forecasted that the EUR/GBP currency cross was likely to fall in value, while the GBP/CHF currency cross is likely to rise in value. Over the week, EUR/GBP fell by 0.16% while the GBP/CHF currency cross rose by 0.39%, so this was a good call which gave an average win of 0.28%.
The Forex market showed a strong decrease in its level of volatility last week, with only 11% of the important currency pairs and crosses moving by more than 1% in value. Volatility is likely to remain at a similar level over the coming week.
Last week was dominated by relative strength in the New Zealand dollar, 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 reversals from one of last week’s key levels would have worked out:
AUD/JPY
We had expected the level at 83.07 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 which was also a pin bar just at the open of 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 the Forex market. This trade has been very profitable, achieving a maximum positive reward to risk ratio so far of more than 5 to 1 based upon the size of the entry candlestick structure.
