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:
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:
For the month of April, I forecasted that the EUR/USD and GBP/USD currency pairs would rise in value.
The performance of my forecast so far this month is as follows:
Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market the previous week. The situation remains the same, so I again give no weekly forecast this week.
Directional volatility in the Forex market is not likely to increase significantly over the coming week, as there are fewer high-impact data releases scheduled for the coming week.
Last week was dominated by relative strength in the Canadian and Australian Dollars, and relative weakness in the Japanese Yen.
You can trade my forecasts in a real or demo Forex brokerage account.
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:
I had expected the level at ¥133.84 might act as resistance in the USD/JPY 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 during last Monday’s New York session (which can be a great time to enter trades in major currency pairs like this one) with an inside bar, marked by the down arrow in the price chart below signaling the timing of this bearish rejection. This trade was profitable, giving a maximum reward to risk ratio of just over 3 to 1 based upon the size of the entry candlestick structure.
I had expected the level at $1.3304 might act as support in the USD/CAD 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 Friday’s New York session (which can be a great time to enter trades in major currency pairs like this one) with a large engulfing bar followed by an inside bar, marked by the up arrow in the price chart below signaling the timing of this bullish rejection. This trade however has not yet quite reached a maximum reward to risk ratio of even 1 to 1 based upon the size of the entry candlestick structure.
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