Market Analysis for Week of 16th of July 2017
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 and 6 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 July 2017
This month, we forecasted that the highest-probability trade would be long EUR/USD. The performance to date is positive:
Weekly Forecast 16th July 2017
Last week, we made no forecast, as there were no strong counter-trend movements.
This week, we again make no forecast, as there were no strong counter-trend movements.
This week has been dominated by relative strength in the Canadian and Australian Dollars, and relative weakness in the Euro.
Volatility was significantly higher than last week, with just over half of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be at a similar level over this coming week.
You can trade our forecasts in a real or demo Forex brokerage account.
Previous Monthly Forecasts
Our forecast for June 2017 was that the best movement would be long EUR/USD. The overall performance was positive:
Our forecast for May 2017 was that the best movements would be long GBP/USD and USD/CAD. The overall performance was negative:
Our forecast for April 2017 was that the best movements would be long GBP/USD and short USD/JPY. The overall performance was nicely positive:
Our forecast for March 2017 was that the best movements would be long USD/CAD and short NZD/USD. The overall performance was positive:
Our forecast for February 2017 was that the best movements would be long AUD/USD and NZD/USD. The overall performance was slightly negative:
Our forecast for January 2017 was that the best movement would be short GBP/USD. The overall performance was negative:
Our forecast for December 2016 was that the best movement would be long USD/JPY. The overall performance was positive:
Our forecast for November 2016 was that the best movement would be long USD/CAD. The overall performance was negative:
Our forecast for October 2016 was that the best movement would be long NZD/USD. The overall performance was negative:
Our forecast for September 2016 was that the best movement would be long NZD/USD. The overall performance was positive:
Our forecast for August 2016 was that the best movements would be short GBP/USD and USD/JPY. The overall performance was slightly negative:
Our forecast for July 2016 was that that the best movements would be short GBP/USD and USD/JPY. The overall performance was positive:
Our forecast for June 2016 was that the best movements would be short USD/JPY, and long EUR/USD. The overall performance was strongly positive:
Our forecast for May 2016 was that the best movements would be short USD/CAD and USD/JPY, and long EUR/USD. The overall performance was strongly negative, as shown below:
Our forecast for April 2016 was that the AUD, CAD and EUR would rise in value against the USD. The forecast performed positively overall, as shown below:
Our forecast for March 2016 was long AUD/USD. The forecast performed very positively overall, as shown below:
Our forecasts for February 2016 were short GBP/USD and EUR/USD, and long USD/CAD. The forecast performed slightly negatively overall, as shown below:
Our forecasts for January 2016 were short GBP/USD and long USD/CHF and USD/CAD. The forecast performed positively, as shown below:
Our forecasts for December 2015 were short GBP/USD and EUR/USD, and long USD/CHF. The forecast performed negatively, as shown below:
Our forecast for November 2015 was short AUD/JPY and AUD/NZD. The forecast performed very negatively, as shown below:
Our forecast for October 2015 was short AUD/JPY. The forecast performed negatively, as shown below:
We made no forecast in September.
Our forecast for August 2015 was short AUD/USD. The forecast performed positively, as shown below:
Our forecast for July 2015 was short NZD/USD. The forecast performed positively, as shown below:
Our forecast for June 2015 was short NZD/USD. The forecast performed positively, as shown below:
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:
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 two of these key pairs last week off key support and resistance levels could have worked out:
USD/CAD
We had expected the level at 1.2694 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 the how the price bounced bullishly off this level after falling strongly, printing a bullish inside candlestick that gave a long trade entry opportunity. Although this was clearly a counter-trend trade, it could have been a winner with a maximum reward to risk ratio greater than 1 to 1. It is often wise to take fast profits when trading against a strong trend, as was the case here.
GBP/USD
We had expected the level at 1.2859 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 the how the price initially hit this level around Monday’s London open – typically a good time to trade this currency pair - and formed a bullish engulfing candle, providing a possible long trade entry marked by the up arrow in the chart below. This long trade would have been a loser, but there was another opportunity a few hours later with a bullish doji candlestick rejecting the same level, shown by the second arrow in the chart below. This long trade could have given a good maximum reward to risk ratio of more than 2 to 1.
That’s all for now. Our next newsletter will be coming to you next week, on Sunday 23rd July.
You can trade our forecasts in a real or demo Forex brokerage account.
