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 16 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 April 2019
For the month of April, we forecast that the best trade will be short EUR/USD. The forecast’s performance to date is shown below:
Last week, we made no weekly forecast. This week, we again make no forecast, as there were no large counter-trend price movements over the past week.
Weekly Forecast April 7
Only 15% of the important currency pairs or crosses moved by more than 1% in value over the past week. Volatility is likely to increase over the coming week.
Last week was dominated by relative strength in the Australian Dollar, and relative weakness in the New Zealand Dollar.
Previous Monthly Forecasts
You can view the results of our previous monthly forecasts here.
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:
USD/CAD
Let’s see how trading one of these key pairs last week off key support and resistance levels could have worked out:
We had expected the level at 1.3304 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work well. The H1 chart below shows the how the price rejected this level towards the end Monday’s New York session (a great time to trade North American currency pairs such as USD/CAD) before finally turning bullish after a few hours with a doji candlestick signaling the timing of the turn. This trade was profitable, achieving a maximum positive reward to risk ratio of just over 3 to 1.
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