Market Analysis for Week of 14 June 2015

Each week we like to send out our thoughts on the Forex market, not only to highlight potential trade set-ups for you to watch out for, but also to enhance your learning with some real-time market analysis.

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 June 2014

This month, we forecasted that the most likely pair to move directionally will be NZD/USD in the short direction. The performance of the forecast so far has been nicely positive:

Weekly Forecast 14^th June 2015

Last week, we made no forecast.

This week, we again make no forecast, as we have no strong counter-trend moves in any currency crosses.

This week has seen continuing significant weakness in the NZD, as well as some continuing strength in the GBP and EUR. However just about everywhere else, this was a counter-trend week. The overall picture is unclear at the moment. There are several central bank statements due this week, so it is probable that there will be a lot of volatility, with near-term directional movement clearer at the end of the week.

There was a decrease in volatility this week, with less than half 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 May 2015 was long CAD/JPY. The forecast performed positively, as shown below:

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 some of these key pairs last week off key support and resistance levels could have worked out:

EUR/USD

We had expected the level at 1.1365 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows how during Wednesday’s London session the price rose to this resistance level, then reversed very strongly with a bearish piercing candle that closed very close to its low, with this pattern marked at (1) in the chart. Note how there was also a well-established trend line working in favor of this trade. Profit on a short trade entered there could have been taken at the predicted support of 1.1179, which worked with good accuracy as the next major support level.

AUD/JPY

We had expected the level at 94.56 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows how during Wednesday’s London session the price fell to this support level, then reversed quite strongly with a bullish inside candle that closed very close to its high, with this pattern marked at (1) in the chart. Unfortunately the move was ultimately a bit weak, with the price spiking down and just about taking out the low and therefore any close stop, before taking off again. This shows that the support level was well chosen.

That’s all until next week. Our next newsletter will be coming to you on Sunday 21^st June.

You can trade our forecasts in a real or demo Forex brokerage account.