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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 March 2023

I made no forecast for the month of March, as the Forex market has been so unsettled and volatile as of late.

Weekly Forecast for Sunday, March 19, 2023

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

Directional volatility in the Forex market is likely to increase even more over the coming week, as there are several key scheduled events, notably the US Federal Reserve’s rate decision. Last week was dominated by relative strength in the Japanese yen, and relative weakness was seen in the Canadian 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 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.

EUR/USD

I had expected the level at $1.0747 might act as resistance in the EUR/USD currency pair last week, as it had previously acted 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 near the end of Monday’s London session with a bearish doji candlestick, marked by the downward arrow, signaling the timing of this bearish rejection. This trade was profitable, giving a maximum reward-to-risk ratio of almost 3 to 1 based upon the size of the entry candlestick before it was stopped out.

USD/JPY

I had expected the level at JPY132.36 might similarly act as support in the USD/JPY currency pair last week, as it had also previously acted as both support and resistance. 

The H1 price chart below shows how the price rejected this level right at the start of Monday’s New York session (which can be a great time to enter trades in major currency pairs like this one) with a large inside bar, marked by the upward arrow, signaling the timing of this bullish rejection. This trade was similarly profitable, giving a maximum reward-to-risk ratio of a little more than 1 to 1 based upon the size of the entry candlestick structure.

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