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 11 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 July 2016

This month we forecasted that the best movements will be short GBP/USD and USD/JPY. The performance so far is as follows:

Weekly Forecast 24th July 2016

Last week, we forecasted that the USD/JPY pair would fall in value. In fact, it rose in value by 1.15%.

This week, we make no forecast, as there were no strong counter-trend moves.

This week has been dominated by strength in the U.S. Dollar, and weakness in the Commodity Currencies.

Volatility was much less than it was during the previous week, with only approximately 22% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be much greater over this coming week, which will be dominated by U.S. and Japanese central bank actions.

You can trade our forecasts in a real or demo Forex brokerage account.

Key Support/Resistance Levels for Popular Pairs

At the FX Academy, 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:

Let’s see how trading two of these key pairs last week off key support and resistance levels could have worked out:

USD/CHF

We had expected the level at 0.9894 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows the price rejected this level three times over the course of last week, as marked by the arrows. The first trade set-up with the bearish inside candle triggering was the best, giving a maximum reward to risk ratio of almost 3 to 1 if the stop had been placed just above the swing high.

USD/CAD

We had expected the level at 1.3143 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows the price rejected this level when it finally arrived there, as marked by the downwards arrow in the chart below, even though the price had clearly been rising all week. The set-up with a bearish inside candle triggering was successful, giving a maximum reward to risk ratio of about 3 to 1 if the stop had been placed just above the swing high.