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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 September 2022

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 results so far are shown below:

Weekly Forecast for Sunday, Sept. 11

Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market. This week, I once again make no forecast.

The Forex market saw a very small decrease in directional volatility last week, with 41% of all the important currency pairs moving by more than 1% in value. Directional volatility is likely to remain high over this coming week, as there are several major data releases due concerning inflation. Last week was dominated by relative strength in the Swiss franc and relative weakness in the Japanese yen.

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 two of these key pairs last week off key support and resistance levels could have worked out.

GBP/USD

We had expected the level at $1.1608 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 at the start of last Tuesday’s session with a bearish inside candlestick, marked by the arrow that is signaling the timing of the bearish rejection. This is typically a great time of day to be entering trades in major Forex currency pairs, especially anything involving the British pound.

This trade was profitable, achieving a maximum positive reward to risk ratio of more than 6 to 1, based upon the size of the entry candlestick structure.

USD/CAD

We had expected the level at $1.3206 might act as resistance in the USD/CAD currency pair last week, as it had similarly acted as both support and resistance previously. The chart below shows how the price rejected this level at the start of last Wednesday’s session with a bearish inverse hammer candlestick, marked by the arrow.

This trade has been nicely profitable, achieving a maximum positive reward to risk ratio of more than 4 to 1 so far, based upon the size of the entry candlestick.

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