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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 October 2022

For the month of October, I forecast that the USD/JPY currency pair will increase in value. For the month of September, I forecasted that the EUR/USD currency pair and the GBP/USD currency pair would decline in value, while the USD/JPY currency pair would increase in value. The positive result is shown below:

Weekly Forecast for Sunday, Oct. 2, 2022

Last week, I forecasted that the CAD/JPY currency cross was likely to increase in value. This was not a good call, as this cross increased over the week by 0.89%. Last week we saw a strong counter trend move in the GBP/USD currency pair, so I forecast that it will decrease in value over the coming week.

The Forex market saw an increase in directional volatility last week, with 77% of all the important currency pairs or crosses moving by more than 1% in value. Directional volatility is likely to remain high over this coming week as there are several major central bank releases due.

Last week was dominated by relative strength in the British pound, as well as relative weakness in the Australian dollar, the New Zealand dollar, the Canadian dollar, and 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's see how trading one of these key pairs last week off key support and resistance levels could have worked out:

USD/CHF

We had expected the level at 0.9738 might act as support in the USD/CHF 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 towards the end of last Thursday’s session with a bullish hammer candlestick, marked by the up arrow which signals the timing of the bullish rejection. This trade has been extremely profitable, achieving a maximum, positive reward to risk ratio of more than 4 to 1, based upon the size of the entry candlestick.

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