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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 26, 2023

Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market. The situation remains the same this week, so I once again give no weekly forecast.

Directional volatility in the Forex market is likely to decline over the coming week, as there are only a few high-impact data releases scheduled. Last week was dominated by relative strength in the Japanese yen, and relative weakness was seen 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 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 the level at $0.6748 might act as resistance 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 the second half of Wednesday’s New York session with a bearish and large inside bar, marked by the downward arrow, signaling the timing of this bearish rejection. This trade has been profitable so far, giving a maximum reward-to-risk ratio of about 0.5 to 1 based upon the size of the entry candlestick structure.

EUR/JPY

I similarly had expected the level at JPY139.43 might act as support in the EUR/JPY currency cross last week, as it had also acted previously as both support and resistance.

The H1 price chart below shows how the price rejected this level right at the end of Monday’s Tokyo session (which can be a great time to enter trades in major currency crosses involving the Japanese yen) with a large doji candlestick which was also close to a pin 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 approximately 3 to 1 based upon the size of the entry candlestick.

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