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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 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. 19, 2023

Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market. The situation has remained the same, so I once again give no weekly forecast this week.

Directional volatility in the Forex market is likely to remain the same over the coming week. Last week was dominated by relative strength in the US dollar, and relative weakness was seen in the Japanese yen.

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.

EUR/USD

I had expected the level at $1.0802 might act as resistance in the EUR/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 New York session (typically a great time to enter trades in major Forex currency pairs) with a large doji 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 1 to 1, based upon the size of the entry candlestick.

GBP/USD

I had expected the level at $1.2264 might act as resistance in the GBP/USD currency pair last week, as this level had similarly acted previously as both support and resistance.

The H1 price chart below shows how the price rejected this level right at the start of last Tuesday’s New York session with a large doji candlestick, once again marked by the downward arrow, signaling the timing of this bearish rejection. This trade has also been profitable, similarly achieving a maximum, positive reward-to-risk ratio of more than 1 to 1, based upon the size of the entry candlestick.

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