This week we’ll 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 16 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’s 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 March 2020

For the month of March, we forecasted that the best trade would be short AUD/JPY. The performance to date has been nicely profitable, as follows:

Weekly Forecast March 29

Last week, we made no weekly forecast. This week, we forecast that the EUR/AUD currency cross will rise in value over the coming week.

The Forex market is showing a similar level of price activity compared to the previous week, with 81% of the important currency pairs and crosses moving by more than 1% in value over the past week. This high level has not been seen for more than 11 years. Volatility is likely to remain high level over the coming weeks as the world grapples with the coronavirus pandemic.

Last week was dominated by relative strength in the British Pound, and relative weakness in the U.S. Dollar.

Previous Monthly Forecasts

You can view the results of our previous monthly forecasts here.

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.

AUD/JPY

We had expected the level at 67.60 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work very well. The H1 chart below shows how near the beginning of last Wednesday’s London session, the price bounced strongly off that level, forming a bearish inside candlestick marked by the down arrow in the price chart below, which immediately broke to the downside. This trade has given a maximum reward to risk ratio so far of just a little more than 8 to 1.