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 11 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 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 Forecasts April/MayÂ
This month we forecasted that the highest-probability trades would be long GBP/USD and short USD/JPY. The overall final performance has been positive:
For the month of May, we forecast that the highest-probability trades will be long GBP/USD and USD/CAD.
Weekly Forecast April 30th
Last week, we made no forecast, as there were no strong counter-trend movements except in GBP/AUD and we did not see this as likely to revert – it did not.
This week, we make no forecast, as again there were no strong counter-trend movements.
This week has been dominated by relative strength in the Euro, and relative weakness in the Japanese Yen.
Volatility was again higher than last week, with almost 70% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be even higher still over this coming week.
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 that should be watched on the more popular currency pairs this week, which might result in either reversals or breakouts:
