Image Source: Pixabay

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 July 2023

For the month of July, I forecasted that the USD/JPY currency pair would rise in value. The performance to date of this forecast is as follows:

Weekly Forecast for Sunday, July 9, 2023

Last week, I made no weekly forecast, as there were no unusually large counter-trend price movements witnessed in the market, which often serves as the basis of my weekly trading strategy. There were similarly no such price movements last week, so I once again make no weekly forecast for the coming week.

Directional volatility in the Forex market increased last week, with 30% of the most important currency pairs and crosses fluctuating over the trading period by more than 1%. Volatility will probably be even higher over the coming week, as the weekly schedule includes the release of US CPI (inflation) data, as well as the policy meetings of two central banks.

Last week was dominated by relative strength in the Japanese yen, and relative weakness was seen in the US dollar.

Key Support/Resistance Levels for Popular Pairs

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

AUD/USD

I had expected that the level at $0.6637 might act as support in the AUD/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 during last Thursday’s London session (which can be a great time to enter Forex trades in Asian currency pairs) with a large pin bar, marked by the upward arrow, signaling the timing of this bullish rejection. This trade was profitable, giving a maximum reward-to-risk ratio of more than 1 to 1 based upon the size of the entry candlestick.

USD/CAD

I had expected that the level at $1.3383 might act as resistance in the USD/CAD currency pair last week, as it had similarly acted previously as both support and resistance. 

The H1 price chart below shows how the price rejected this level not long after the start of last Friday’s London session with a bearish pin bar, marked by the downward arrow, signaling the timing of this bearish rejection. This trade was also profitable, giving a maximum reward-to-risk ratio of more than 5 to 1 based upon the size of the entry candlestick.

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