This week we’ll 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 16 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’s take a 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 2018
For the month of October, we forecast that the best trade will be long USD/JPY.
For the month of September, we forecasted that the best trade would be short AUD/USD. The final performance to date was as follows:
|Currency Pair||Forecast Direction||Interest Rate Differential||Final Performance|
|AUD/USD||Short ↓||0.50% (2.00% – 1.50%)||-0.46%|
Weekly Forecast30rd September 2018
Last week, we forecasted that the AUD/USD currency pair would fall in value. It did, by 0.51%.
We make no weekly forecast this week, as there were no strong counter-trend price movements.
37% of the important currency pairs or crosses moved by more than 1% value over the past week. This volatility is relatively low, and we expect it to be similar over the coming week.
This week has been dominated by relative strength in the U.S. Dollar, and relative weakness in the Swiss Franc.
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 should be watched on the more popular currency pairs this week, which might result in either reversals or breakouts:
|Currency Pair||Key Support / Resistance Levels|
|AUD/USD||Support: 0.7197, 0.7129, 0.6992, 0.6940
Resistance: 0.7241, 0.7321, 0.7382, 0.7479
|EUR/USD||Support: 1.1566, 1.1535, 1.1496, 1.1444
Resistance: 1.1659, 1.1697, 1.1732, 1.1875
|GBP/USD||Support: 1.2951, 1.2894, 1.2816, 1.2780
Resistance: 1.3072, 1.3217, 1.3350, 1.3482
|USD/JPY||Support: 113.13, 112.41, 111.66, 111.43
Resistance: 114.18, 114.74, 115.97, 116.28
|AUD/JPY||Support: 81.26, 81.02, 80.56, 79.57
Resistance: 82.60, 82.81, 83.45, 84.54
|EUR/JPY||Support: 130.70, 130.14, 129.97, 129.48
Resistance: 134.12, 136.89, 137.56, 140.50
|USD/CAD||Support: 1.2826, 1.2793, 1.2750, 1.2650
Resistance: 1.2969, 1.3011, 1.3089, 1.3118
|USD/CHF||Support: 0.9701, 0.9637, 0.9626, 0.9605
Resistance: 0.9856, 0.9865, 0.9904, 0.9920
Let’s see how trading two of these key pairs last week off key support and resistance levels could have worked out:
We had expected the level at 1.1732 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 the how the price rejected this level close to the London open last Monday, marked by the up arrow in the price chart below, forming a bullish pin candlestick which broke up right away. This is often a great time to enter trades involving European currencies such as the Euro, and such candlesticks are often useful indicators of reversals when their wicks reject key levels. This trade was profitable, achieving a maximum positive reward to risk ratio of a little more than 4 to 1.
We had expected the level at 1.3217 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 the how the price rejected this level late in the New York session last Wednesday, marked by the down arrow in the price chart below, forming a large, bearish doji candlestick which broke down after a few hours. This trade has been profitable, achieving a maximum positive reward to risk ratio so far of more than 2 to 1.
This article provided by NewsEdge.