Photo by Michelle Spollen on 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 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 make no forecast for the month of March, as Forex markets are unsettled. For the month of February, I forecasted that the EUR/USD currency pair would rise in value. The final performance was as follows:

Weekly Forecast for Sunday, March 5, 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, so I once again provide no weekly forecast this week.

Directional volatility in the Forex market is likely to increase over the coming week. Last week was dominated by relative strength in the euro, and relative weakness was seen in the US dollar. However, the amounts were very low, so these statistics are not very meaningful.

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.

USD/CAD

I had expected the level at $1.3656  might act as resistance in the USD/CAD 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 right at the start of Wednesday’s session with a large engulfing candlestick, 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 more than 2 to 1, based upon the size of the entry candlestick structure.

EUR/JPY

I had expected the level at JPY145.51 might act as support in the EUR/JPY currency cross 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 right at the end of last Thursday’s Tokyo session (typically a great time to enter trades in Forex currency crosses involving the Japanese yen) with a small pin bar/inverted hammer candlestick, once again marked by the downward arrow, signaling the timing of this bearish rejection. 

This trade has also been very profitable, achieving a maximum positive reward-to-risk ratio of more than 7 to 1 so far, based upon the size of the entry candlestick.

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