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 June 2021
For the month of June, we forecasted that the USD/CAD currency pair would fall in value, and the CAD/JPY currency cross would rise in value. The performance of the forecast so far is shown below:
Weekly Forecast 13th June 2021
Last week, we made no weekly forecast, as there were no large counter-trend price movements in any important currency pairs or crosses.
We again make no forecast this week as this situation is unchanged.
The Forex market showed a very small increase in its level of volatility last week, with only 7% of the important currency pairs and crosses again moving by more than 1% in value. However, volatility is likely to rise considerably over the coming week.
Last week was dominated by relative strength in the Swiss Franc, and relative weakness in the New Zealand Dollar. However, these price movements were so small as to be relatively 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:
GBP/USD
We had expected the level at 1.4116 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 engulfing candlestick just at the open of last Monday’s London session, marked by the up arrow in the price chart below, which is typically a good time to be trading major pairs involving the British Pound such as this one. This trade was not very profitable due to the wider ranging environment, achieving a maximum positive reward to risk ratio of a little less than 2 to 1 based upon the size of the entry candlestick structure.
AUD/USD
We had expected the level at 0.7776 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 right at the start of last Friday’s London session, marked by the down arrow in the price chart below, which is typically a good time to be trading the Forex market. This trade has been nicely profitable, achieving a maximum positive reward to risk ratio so far of more than 3 to 1 based upon the size of the entry candlestick structure.
