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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 November 2022

I made no forecast for the month of November, as I thought markets had become too unsettled to look beyond the next few days. I think this has proven to be a good call as direction in the Forex market has become uncertain over recent days.

Weekly Forecast for Sunday, Nov. 20, 2022

Last week, I made no weekly forecast. This week, I once again make no weekly forecast, as there were no unusually strong counter-trend price movements in the market last week.

The Forex market saw a strong decrease in directional volatility last week, with only 41% of the most important currency pairs and crosses moving by more than 1% in value. Directional volatility is likely to remain relatively low or even fall further over the coming week.

Last week was dominated by the relative strength in the New Zealand dollar, and the relative weakness in the Swiss franc.

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 us see how trading two of these key pairs last week off key support and resistance levels could have worked out.

EUR/USD

I had expected the level at $1.0281 might act as support in the EUR/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 right at the start of last Monday’s New York session (which can often be a great time to enter Forex trades) with a bullish outside candlestick, which is marked by the upward arrow, signaling the timing of this bullish rejection. This trade has been profitable, achieving a maximum positive reward-to-risk ratio of more than 2 to 1 so far based upon the size of the entry candlestick.

GBP/USD

I had expected the level at $1.1721 might act as support in the GBP/USD currency pair 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 close of last Monday’s London session (which can often be a great time to enter Forex trades in the British pound) with a bullish doji candlestick, marked by the upward arrow, signaling the timing of this bullish rejection. This trade has been profitable, achieving a maximum positive reward-to-risk ratio of more than 4 to 1 so far based upon the size of the entry candlestick structure.

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