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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 September 2023

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

Weekly Forecast for Sunday, Sept. 10, 2023

I make no forecast this week, as there were no unusually strong counter-trend price movements seen throughout the recent trading period.

Directional volatility in the Forex market was very low again last week, with only two important currency pairs fluctuating over the trading period by more than 1%. Volatility is likely to be higher over the coming week, as it is unusual for it to remain so low as the month of September goes on.

Last week was dominated by relative strength in the US dollar, and relative weakness was seen in the Japanese yen. This appears to be long-term trend.

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 $1.2643 might act as resistance in the GBP/USD currency pair last week, as it had previously acted 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 during last Monday’s London session (which can often be a great time to enter trades in major currency pairs like this one) with an engulfing candlestick, 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 8 to 1 based upon the size of the entry candlestick structure.

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EUR/JPY

I had expected the level at JPY157.18 might act as support in the EUR/JPY currency cross 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 Friday’s Tokyo session (which can also be a great time to enter trades in currency pairs or crosses involving the Japanese yen, like this one) with a large engulfing candlestick, marked by the upward arrow, signaling the timing of this bullish rejection. 

This trade has been somewhat profitable, giving a maximum reward-to-risk ratio of almost to 1 based upon the size of the entry candlestick structure.

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