This week we will 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 18 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 us 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 2021

For the month of July, we forecast that the EUR/USD currency pair will fall in value, while the USD/JPY currency pair will rise in value. The performance to date is shown below:

Weekly Forecast July 18

Last week, we made no weekly forecast, as there were no large counter-trend price movements in any important currency pairs or crosses.

We again make no forecast this week.

The Forex market saw its level of volatility stay approximately the same last week, with 33% of all the important currency pairs or crosses moving by more than 1% in value. Volatility is likely to decrease somewhat over the coming week.

Last week was dominated by relative strength in the U.S. dollar, and relative weakness in the Canadian 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 us see how trading reversals from one of last week’s key levels would have worked out:

EUR/USD

We had expected the level at 1.1772 might act as support, 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 with a bullish near-doji pin candlestick at the start of last Wednesday’s Asian session, marked by the up arrow in the price chart below. This trade has been nicely profitable due to the relatively strong bullish price reversal seen towards the end of last week, achieving a maximum positive reward to risk ratio of more than 7 to 1 based upon the size of the entry candlestick.