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’s 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 2019

For the month of September, we forecast that the best trades would be short NZD/JPY and short EUR/JPY. The performance to date is shown below:

For the month of August, we forecasted that the best trades would be short GBP/JPY and short AUD/JPY. The forecast was profitable, with the final performance shown below:

Weekly Forecast September 8

Last week, we made no weekly forecast. This week, as our weekly forecasts are based upon fading strong counter-trend movements, we forecast that the AUD/JPY and NZD/JPY currency crosses will fall in value.

The Forex market has become more active, with 44% of the important currency pairs and crosses moving by more than 1% in value over the past week. Volatility is likely to be similar or possible a little lower over the coming week.

Last week was dominated by relative strength in the Australian Dollar, and relative weakness in the Japanese Yen.

Previous Monthly Forecasts

You can view the results of our previous monthly forecasts here.

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 should be watched on the more popular currency pairs this week,which might result in either reversals or breakouts:

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

USD/CHF

We had expected the level at 0.9800 might act as support, 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 towards the start of the second half of last Wednesday’s New York session, turning bullish right away with an inside candlestick marked by the up arrow signaling the timing of the turn, which took a few hours to complete. This trade has been very profitable, achieving a maximum positive reward to risk ratio of approximately 9 to 1 so far based upon the size of the entry candlestick structure.