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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.

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Monthly Forecast for October 2023

For the month of October, I forecasted that the USD/JPY currency pair would gain in value. The result so far is as follows:

Weekly Forecast for Sunday, Oct. 22, 2023

Last week, I gave no weekly forecast, as there were no strong counter-trend price movements in the market. This week, I once again provide no forecast for similar reasons.

Directional volatility in the Forex market increased slightly last week, with one third of the most important currency pairs fluctuating over the week by more than 1%. Volatility is likely to remain at a similar level over the coming week, provided there is no widening of the war in the Middle East.

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

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.

GBP/USD

I had expected the level at $1.2219 might act as resistance in the GBP/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 near the end of last Monday’s New York session (which can be a great time to enter trades in major currency pairs like this one) with an engulfing bar, marked by the downward arrow, signaling the timing of this bearish rejection. This trade was very profitable, giving a maximum reward-to-risk ratio of more than 11 to 1 based upon the size of the entry candlestick structure.

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AUD/USD

I had expected the level at $0.6388 might act as resistance in the AUD/USD currency pair 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 start of last Wednesday’s London session (which can similarly be a great time to enter trades in major currency pairs like this one) with a large pin bar, marked by the downward arrow, signaling the timing of this bearish rejection. This trade was also very profitable, giving a maximum reward-to-risk ratio of about 7 to 1 based upon the size of the entry candlestick.

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