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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 May 2022

For the month of May, I forecasted that the US Dollar Index (USDX) would rise in value. So far, it has fallen by 0.79% this month to date.

Weekly Forecast for Sunday, May 29, 2022

Last week, I forecasted that the USD/CHF currency pair would rise in value. Unfortunately, it declined last week by 1.79%. I make no forecast this week, as there were no unusually strong counter-trend price movements in the Forex market last week.

The Forex market saw its level of directional volatility fall again last week, with 33% of all the important currency pairs or crosses moving by more than 1% in value. Directional volatility is likely to decrease or remain the same over this coming week.

Last week was dominated by relative strength in the New Zealand dollar and relative weakness in the US 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 watched on the more popular currency pairs this week.

Let's how trading reversals from one of last week’s key levels could have worked out.

USD/CAD

I had expected that the level at $1.2869 might function as resistance, as it had previously functioned as both support and resistance. Note how such “flipping” levels can be very reliable reversal points. 

The H1 chart below shows how the price rejected this level with a bearish pin bar last Wednesday. The entry point is marked by the arrow within the price chart below.

This trade has been nicely profitable so far, achieving a maximum positive risk/reward ratio of more than 4 to 1 based upon the size of the entry candlestick.

USD/CAD Hourly Chart