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 Forecast May 2017
This month we forecast that the highest-probability trades would be long GBP/USD and USD/CAD. The overall performance to date has been very slightly negative:
Weekly Forecast 21st May 2017
Last week, we made no forecast, as there were no strong counter-trend movements.
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 U.S. Dollar.
Volatility was higher than last week, with 48% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to remain at a similar level 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 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:
