This week we’ll begin with our monthly and weekly forecasts of the currency pairs worth watching. The first part of our forecast is based upon our research of the past 16 years of Forex prices, which show that the following methodologies have all produced profitable results:

• Trading the two currencies that are trending the most strongly over the past 3 months.
• Assuming that trends are usually ready to reverse after 12 months.
• Trading against very strong counter-trend movements by currency pairs made during the previous week.
• Buying currencies with high-interest rates and selling currencies with low-interest rates.

Let us 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 October 2020

This month, we forecast that the USD/JPY currency pair is likely to fall in value.

For the month of September, we forecast that the EUR/USD currency pair was likely to see a further rise in price. However, the September performance was negative, as shown below:

Weekly Forecast October 4 

Last week, we forecast that the AUD/JPY currency cross and AUD/USD currency pair were both likely to rise in value over the coming week.

These were good calls, as the AUD/USD rose by 1.95% last week, and the AUD/JPY rose by 1.71%.

We make no weekly forecast this week, as there were no very strong counter-trend price movement to exploit.

The Forex market showed a decrease in volatility compared to the previous week, with only 33% of the important currency pairs and crosses moving by more than 1% in value last week. Volatility is likely to be similar this week

Last week was dominated by relative strength in the Australian Dollar and relative weakness in the U.S. Dollar.

Key Support/Resistance Levels for Popular Pairs

We 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.