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 September 2016

This month we forecasted that the highest-probability trade will be long NZD/USD. The performance so far is slightly negative, as follows:

Weekly Forecast 25th September 2016

Last week, we made no forecast.

This week, we make no forecast, as there were no strong counter-trend movements with the exception of AUD/NZD, and this cross does not look ripe for a reversal right now.

This week has again been dominated by strength in the Australian Dollar, and weakness in the New Zealand Dollar.

Volatility was slightly less than it was during the previous week, with approximately 37% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be still lower over this coming week, which will be dominated by releases of U.S. economic data.

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

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:

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

EUR/USD

We had expected the level at 1.1204 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 how the price initially hit this level around the London open last Tuesday, a time which can be crucial for currency crosses or pairs involving the Euro such as the EUR/USD currency pair. The price reversed immediately with a bearish pin candle marked by the red down arrow in the chart. This short trade gave a maximum reward to risk ratio of more than 3 to 1, if the stop had been placed just above the swing high.

USD/JPY

We had expected the level at 102.60 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 how the price initially hit this level during the Tokyo session last Wednesday, a time which can be crucial for currency crosses or pairs involving the Yen such as the USD/JPY currency pair. The price reversed immediately with a bearish pin candle marked by the red down arrow in the chart. This short trade has so far give a maximum reward to risk ratio of almost 5 to 1, if the stop had been placed just above the swing high.

You can trade our forecasts in a real or demo Forex brokerage account to test the strategies and strengthen your self-confidence before investing real funds.