Market Analysis for Week of 11 May 2015
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 2014
We forecasted that the pair most likely to change in value significantly during the month of May would be CAD/JPY in the long direction. The performance has been slightly positive so far:
Weekly Forecast 10th May 2015
We made no forecast last week.
We make no forecast this week.
This week saw a weakening of the EUR, USD and NZD, while the GBP, AUD and CAD continue to strengthen. There is a suggestion of a possible major trend change to short USD or a consolidation. Overall, the market is in a state of flux.
There was a notable decrease in volatility this week, with only about one-third of the major and minor currency pairs fluctuating in value by more than 1%.
You can trade our forecasts in a real or demo Forex brokerage account.
Previous Monthly Forecasts
Our forecast for April 2015 was short EUR/USD. The forecast performed very negatively, as shown below:
Our forecast for March 2015 was short EUR/USD. The forecast performed positively, as shown below:
Our forecast for February 2015 was long USD/CAD. The forecast did not perform positively, as shown below:
Our forecast for January 2015 was long USD/JPY. The forecast did not perform positively, as shown below:
Our forecast for December 2014 was long USD/JPY. The forecast performed positively, as shown below:
Our forecast for November 2014 was long USD/JPY. The forecast performed extremely positively, as shown below:
Our forecast for October 2014 was short EUR/USD and long USD/JPY. The forecast performed very positively, as shown below:
Earlier monthly forecasts may be seen here.
Key Support/Resistance Levels for Popular Pairs
At the FX Academy, 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:
AUD/USD
We had expected the level at 0.7805 between might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H4 chart below shows how during Tuesday’s Asian session the price fell hard to below the support level, then reversing with strong bullishness to printing a very strong bullish outside candle marked at (1). There was an immediate strong break to the upside. Profit could have been taken at the anticipated resistance level of 0.8027, which worked with great accuracy.
