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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 October 2023
For the month of October, I forecasted that the USD/JPY currency pair would gain in value.
The result so far is as follows:
Weekly Forecast 22nd October 2023
Last week, I gave no weekly forecast, as there were no strong counter-trend price movements.
This week, I again have no forecast.
Directional volatility in the Forex market increased slightly last week with one third of the most important currency pairs fluctuating over the week by more than 1%. Volatility is likely to remain at a similar level over the coming week, provided there is no widening of the war in the Middle East.
Last week was dominated by relative strength in the Euro, and relative weakness in the New Zealand Dollar.
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 monitored 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:
GBP/USD
I had expected the level at $1.2219 might act as resistance in the GBP/USD currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level near the end of last Monday’s New York session (which can be a great time to enter trades in major currency pairs like this one) with an engulfing bar, marked by the down arrow in the price chart below signaling the timing of this bearish rejection. This trade was very profitable, giving a maximum reward to risk ratio of more than 11 to 1 based upon the size of the entry candlestick structure.
AUD/USD
I had expected the level at $0.6388 might act as resistance in the AUD/USD currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level right at the start of last Wednesday’s London session (which can be a great time to enter trades in major currency pairs like this one) with a large pin bar, marked by the down arrow in the price chart below signaling the timing of this bearish rejection. This trade was very profitable, giving a maximum reward to risk ratio of about 7 to 1 based upon the size of the entry candlestick.
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