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 November 2023
For the month of November, I made no forecast, as the US Dollar was making a deep counter-trend retracement.
Weekly Forecast 26th November 2023
Last week, I forecasted that the AUD/USD and EUR/USD currency pairs are likely to decline in value. Unfortunately, the EUR/USD currency pair rose by 0.22% and the AUD/USD by 1.01%, giving an average loss of 0.62%.
This week, I make no forecast as there were no strong counter-trend price movements over the past week.
Directional volatility in the Forex market decreased last week with only 22% of the most important currency pairs fluctuating over the week by more than 1%. Volatility is likely to remain low over the coming week, as there are few high-impact data releases scheduled.
Last week was dominated by relative strength in the New Zealand Dollar, and relative weakness in the US 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 one of these key pairs last week off key support and resistance levels could have worked out:
EUR/USD
I had expected the level at $1.0857 might act as support in the EUR/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 end of last Wednesday’s New York / London session overlap (which can be a great time to enter trades in major currency pairs like this one) with a bullish inside bar, marked by the up arrow in the price chart below signaling the timing of this bullish rejection. This trade has been nicely profitable so far, giving a maximum reward-to-risk ratio of almost 3 to 1 based on the size of the entry candlestick structure.
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