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 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 July 2020

For the month of July, we made no forecast.

Weekly Forecast July 12 

Last week, we made no forecast as there were no strong counter-trend movements sharply against any dominant trends over the past week.

This week, we again make no forecast.

The Forex market showed a decrease in volatility compared to the previous week, with only 11% of the important currency pairs and crosses moving by more than 1% in value last week. Volatility is likely to remain over the coming week.

Last week was dominated by relative strength in New Zealand, and relative weakness in the Australian Dollar.

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 can be watched on the more popular currency pairs this week.

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

GBP/USD

We had expected the level at 1.2670 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 how the price rejected this level near the start of last Thursday’s New York session, with this New York/London overlap, it is typically a great time to be trading major currency pairs such as the GBP/USD, turning decisively bearish with a bearish doji candlestick breaking down right away at the down arrow shown in the price chart below. This trade has been profitable, achieving a maximum positive reward to risk ratio of more than 3 to 1 so far based upon the size of the entry candlestick structure.

USD/CAD

We had expected the level at 1.3624 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 how the price rejected this level near the start of last Wednesday’s London session, typically a great time to be looking for price reversals in the Forex market, turning decisively bearish with a bearish pin candlestick breaking down right away at the down arrow shown in the price chart below. This trade was profitable, achieving a maximum positive reward to risk ratio of more than 5 to 1 based upon the size of the entry candlestick.