Photo by Michelle Spollen on Unsplash

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 February 2023

For the month of February, I forecasted that the EUR/USD currency pair would rise in value. The performance so far is follows.

Weekly Forecast for Sunday, Feb. 12, 2023

Last week, I forecasted that the GBP/CAD currency cross would rise in value, as it made an unusually strong counter-trend price movement over the previous week. Unfortunately, the cross fell by 0.35% in value, producing a small loss.

I made no weekly forecast this week, as there were no unusually strong counter-trend price movements in the Forex market. Directional volatility in the Forex market is likely to increase over the coming week. Last week was dominated by relative strength in the Swiss franc, and relative weakness was seen in the euro.

Key Support/Resistance Levels for Popular Pairs

I 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 one of these key pairs last week off of key support and resistance levels could have worked out.

USD/CAD

I had expected the level at $1.3476 might act as resistance in the USD/CAD 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 shortly after the start of last Monday’s New York session (which is typically a great time to enter trades in major Forex currency pairs) with a bearish inverted hammer candlestick, marked by the downward arrow, signaling the timing of this bearish rejection. 

This trade has been decently profitable, achieving a maximum positive reward-to-risk ratio of more than 2 to 1 so far, based upon the size of the entry candlestick structure.

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