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 March 2018

For the month of March, we forecast that the best trade will be long GBP/JPY.

For the month of February, we forecast that the best trade would be long GBP/USD. The forecast’s performance was positive, as shown below:

We made no forecast last week, as there were no strong counter-trend moves last week. We again make no forecast this week.

Weekly Forecast March, 3 2019

About 48% of the important currency pairs or crosses moved by more than 1% in value over the past week. Volatility has risen strongly and will probably rise further over the coming week.

This week has been dominated by relative strength in the British Pound, and relative weakness in the Japanese Yen.

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:

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

GBP/USD

We had expected the level at 1.3350 might act as resistance, 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 just before the London close on Wednesday, before forming a bearish engulfing candlestick which broke down right away. This is often a great time to enter trades in currency pair involving the British Pounds, and engulfing candlesticks of a good size are often useful indicators of reversals when the structure’s wicks reject key levels. This trade has been nicely profitable, despite being clearly countertrend, achieving a maximum positive reward to risk ratio of more than 2 to 1 so far.