Image Source: 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 demonstrate 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 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 for July 2022

For the month of June, I forecasted that the US Dollar Index would rise in value. It did, by 0.69%, producing a profitable trade. For the month of July, I forecast that the EUR/USD currency pair and the GBP/USD currency pair will both decline in value.

Weekly Forecast for Sunday, July 3, 2022

Last week, I made no weekly forecast. This week, I once again make no weekly forecast as last week saw no major counter-trend price movements over the period.

The Forex market saw its level of directional volatility rise last week, with 44% of all the important currency pairs or crosses moving by more than 1% in value. Directional volatility is likely to increase again over this coming week as there are so few major data releases scheduled.

Last week was dominated by relative strength in the Swiss franc and relative weakness in the Australian dollar.

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 watched on the more popular currency pairs this week.

Let us see how trading reversals from two of last week’s key levels could have worked out.

EUR/USD

I had expected that the level at $1.0601 might function as resistance, as it had previously functioned as both support and resistance. Note how such “flipping” levels can be very reliable reversal points. The chart below shows how the price rejected this level with a bearish pin bar during last Monday’s London/New York overlap, which is typically a great time to be trading Forex.

The entry point is marked by the down arrow. This trade has been very profitable so far, achieving a maximum positive risk-reward ratio slightly higher than 9 to 1, based upon the size of the entry candlestick.

EUR/USD Hourly Chart

USD/CHF

I expected that the level at 0.9498 might act as support. The chart below shows how the price rejected this level with a very clear bullish reversal – a candlestick which was partly a doji, partly a pin bar – just before last Wednesday’s London/New York overlap. 

The entry point is marked by the up arrow. This trade has been nicely profitable so far, achieving a maximum positive risk-reward ratio slightly higher than 6 to 1, based upon the size of the entry candlestick.

USD/CHF Hourly Chart