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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:
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 June, I forecasted that the GBP/USD currency pair would rise in value.
The performance of this forecast so far is as follows:
Last week, I made no weekly forecast, as there were no unusually large counter-trend price movements, which is the basis of my weekly trading strategy. This week, I think that the AUD/USD currency pair is slightly more likely than not to decline, while the EUR/NOK currency cross is likely to rise in value.
Directional volatility in the Forex market remained the same last week with 26% of the most important currency pairs and crosses fluctuating over the week by more than 1%. Volatility will probably be higher over the coming week, as the US Federal Reserve will be meeting to decide whether to hike interest rates again.
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 ¥148.64 might act as support in the EUR/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 right at the start of last Monday’s London session (which can be a great time to enter Forex trades) with a large engulfing bar, marked by the up arrow in the price chart below signaling the timing of this bullish rejection. This trade was profitable, giving a maximum reward-to-risk ratio of more than 3 to 1 based upon the size of the entry candlestick structure.
I had expected the level at $1.3455 might act as resistance 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 Monday’s London/New York session overlap (which can be a great time to enter trades in Forex currency pairs like this one) with a very large doji candlestick, 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 more than 2 to 1 based upon the size of the entry candlestick.
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