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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 very positive results so far are shown below:

Weekly Forecast for Sunday, Sept. 25, 2022

Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market. This week, I forecast that the CAD/JPY currency cross is likely to increase in value.

The Forex market saw an increase in directional volatility last week, with 74% of all the important currency pairs moving by more than 1% in value. Directional volatility is likely to increase even more over this coming week as there are several major central bank releases due.

Last week was dominated by relative strength in the US dollar and the Swiss franc, as well as relative weakness in the British pound, the New Zealand dollar, and the euro.

Key Support/Resistance Levels for Popular Pairs

I often teach that trades should be entered and exited at or near 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 off of key support and resistance levels could have worked out last week.

USD/CAD

We had expected that the level at $1.3236 might act as support in the USD/CAD 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 at the start of Tuesday’s Asian session with a bullish hammer candlestick, marked by the arrow, signaling the timing of the bullish rejection. This trade has been extremely profitable, achieving a maximum, positive reward/risk ratio of more than 11 to 1, based upon the size of the entry candlestick.

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