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 September 2020

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

Weekly Forecast September 13 

Last week, we made no weekly forecast.

This week, we again make no forecast, as although there were strong counter-trend price movements in the British Pound against other currencies, we are not confident that the Pound is likely to bounce back.

The Forex market showed an increase in volatility compared to the previous week, with 37% of the important currency pairs and crosses moving by more than 1% in value last week. Volatility is likely to be even higher next week as we will get central bank input concerning three major currencies (the USD, the JPY, and the GBP).

Last week was dominated by relative strength in the Euro and relative weakness in the British Pound.

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.

Let us see how trading one of these key pairs last week off key support and resistance levels could have worked out:

AUD/USD

We had expected the level at 0.7300 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work well. The H1 chart below shows how the price rejected this level right at the start of last Tuesday’s New York session, typically a great time to be trading currency pairs involving the U.S. Dollar, turning decisively bullish when a strongly bullish pin candlestick broke up right away at the up arrow shown in the price chart below. This trade was nicely profitable, achieving a maximum positive reward to risk ratio of more than 3 to 1 based upon the size of the entry candlestick structure.