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 May, 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. This week, I forecast that the EUR/AUD currency cross will rise in value.
Directional volatility in the Forex market will probably remain the same or increase over the coming week, as there are some extremely high-impact data releases scheduled for the coming week such as US CPI data.
Last week was dominated by relative strength in the Australian Dollar, and relative weakness in the US Dollar.
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 $1.1089 might act as resistance 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 start of last Thursday’s London 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 has been nicely profitable so far, giving a maximum reward-to-risk ratio of approximately 5 to 1 based upon the size of the entry candlestick.
I had expected the level at ¥89.22 might act as resistance in the AUD/JPY currency cross 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 Thursday’s New York session with an inside bar which was also nearly a doji, marked by the up arrow in the price chart below signaling the timing of this bullish rejection. This trade reached a maximum reward-to-risk ratio a little higher than 5 to 1 based upon the size of the entry candlestick structure.
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