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Today, I will begin with my monthly and weekly forecasts of the currency pairs worth watching. The first part of my forecast is based upon 20 years' worth of research of Forex prices, which shows that the following methodologies have all produced profitable results:

• Trading the two currencies that are trending the most strongly over the past six months.
• Trading against very strong weekly counter-trend movements by currency pairs made during the previous week.
• Carry trade: 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 for August, 2023

I made no forecast for the month of August, as I did not see any trends in the Forex market that looked reliable enough.

Weekly Forecast for Sunday, Aug. 13, 2023

Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements present in the markets. I once again do not provide a forecast this week, as the situation remains unchanged.

Directional volatility in the Forex market rose last week, with 48% of the most important currency pairs and crosses fluctuating over the week by more than 1%. Volatility is likely to be lower over the coming week, as we have little US data due, which tends to be the main driver of the Forex market these days.

Last week was dominated by relative strength in the US dollar, and relative weakness was seen in the New Zealand dollar.

Key Support/Resistance Levels for Popular Pairs

I often 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's see how trading two of these key pairs last week off of key support and resistance levels could have worked out.

GBP/USD

I had expected the level at $1.2685 might act as support in the GBP/USD 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 Tuesday’s London/New York session overlap (which can be a great time to enter Forex trades in major currency pairs such as this one) with a doji candlestick, marked by the green upward arrow, signaling the timing of this bullish rejection. 

This trade was nicely profitable, giving a maximum reward-to-risk ratio of more than 4 to 1 based upon the size of the entry candlestick.

AUD/JPY

I had expected the level at JPY92.99 might act as support in the AUD/JPY currency cross last week, as it had similarly acted as both support and resistance previously. 

The H1 price chart below shows how the price rejected this level right at the start of last Tuesday’s London/New York session overlap with a bullish engulfing bar, marked by the green upward arrow, signaling the timing of this bullish rejection. This trade was also nicely profitable, giving a maximum reward-to-risk ratio of more than 3 to 1 based upon the size of the entry candlestick structure.

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