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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. 29, 2023

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

Directional volatility in the Forex market decreased last week, with 22% of the most important currency pairs fluctuating over the trading period by more than 1%. Volatility is likely to increase over the coming week, due mostly to the scheduled FOMC meeting. If the war in the Middle East widens, volatility will extend even further.

Last week was dominated by relative strength in the US dollar, and relative weakness was seen in the Canadian 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.

USD/JPY

I had expected the level at JPY149.46 might act as support in the USD/JPY 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 Tuesday’s London session (which can be a great time to enter trades in major currency pairs like this one) with a bullish pin bar, marked by the upward arrow, signaling the timing of this bullish rejection. This trade was very profitable, giving a maximum reward-to-risk ratio of more than 6 to 1 based upon the size of the entry candlestick.

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USD/CHF

I had expected the level at $0.8898 might act as support in the USD/CHF 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 start of last Tuesday’s London session with a large bullish engulfing bar, marked by the upward arrow, signaling the timing of this bullish rejection. This trade was also profitable, giving a maximum reward-to-risk ratio of about 3 to 1 based upon the size of the entry candlestick.

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