This week I will begin with my monthly and weekly Forex forecast of the currency pairs worth watching. The first part of my forecast is based upon my research of the past 20 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 6 months.
- Trading against very strong weekly counter-trend movements by currency pairs made during the previous week.
- Carry Trade: 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 2022
For the month of July, I forecasted that the EUR/USD currency pair and the GBP/USD currency pair would both decline in value. The results so far are as nicely profitable:
Currency Pair | Forecasted Direction | Interest Rate Differential | Performance to Date |
|---|---|---|---|
EUR/USD | Short ↓ | +1.75% (1.75% - 0.00%) | +3.79% |
GBP/USD | Short ↓ | +1.25% (1.75% - 0.00%) | +2.54% |
Monthly Forex Forecast Performance
Weekly Forecast 17th July 2022
Last week, I made no weekly forecast.
This week, I again make no weekly forecast as last week saw no major counter-trend price movements over the week.
The Forex market saw its level of directional volatility fall last week, with only 30% of all the important currency pairs or crosses moving by more than 1% in value. Directional volatility is likely to increase over this coming week as there are several major data releases scheduled, including a major policy release from the European Central Bank.
Last week was dominated by relative strength in the US Dollar, and relative weakness in the Japanese Yen.
You can trade my forecasts in a real or demo Forex brokerage account.
Key Support/Resistance Levels for Popular Pairs
I 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.
Currency Pair | Key Support / Resistance Levels |
|---|---|
AUD/USD | Support: 0.6719, 0.6683, 0.6570, 0.6556Resistance: 0.6797, 0.6835, 0.6875, 0.6895 |
EUR/USD | Support: 1.0073, 1.0042, 0.9950, 0.9900Resistance: 1.0121, 1.0221, 1.0280, 1.0350 |
GBP/USD | Support: 1.1695, 1.1414, 1.1400, 1.1350Resistance: 1.1884, 1.1967, 1.2011, 1.2097 |
USD/JPY | Support: 137.76, 136.48, 135.90, 135.44Resistance: 139.50, 140.00, 140.50, 141.00 |
AUD/JPY | Support: 93.22, 92.64, 91.53, 90.58Resistance: 94.20, 95.00, 95.23, 95.54 |
EUR/JPY | Support: 138.79, 138.07, 137.78, 136.83 Resistance: 140.22, 141.14, 141.93, 142.45 |
USD/CAD | Support: 1.2974, 1.2903, 1.2844, 1.2805Resistance: 1.3046, 1.3090, 1.3179, 1.3206 |
USD/CHF | Support: 0.9749, 0.9722, 0.9638, 0.9574Resistance: 0.9813, 0.9983, 1.0035, 1.0111 |
Key Support and Resistance Levels
Let us see how trading reversals from one of last week’s key levels could have worked out:
AUD/USD
I had expected the level at 0.6683 might function as support, as it had previously functioned as both support and resistance. Note how such “flipping” levels can be very reliable reversal points. The H1 chart below shows how the price rejected this level with a bullish inside bar which was also a pin bar during last Thursday’s New York session, which is typically a great time to be trading Forex pairs or crosses involving the US Dollar. The entry point is marked by the up arrow within the price chart below. This trade has been nicely profitable so far, achieving a maximum positive risk-reward ratio of approximately 4 to 1 based upon the size of the entry candlestick structure.
AUD/USD Hourly Chart
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