Market Analysis for Week of 28th of May 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 very strongly positive:
Weekly Forecast 28st 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 was quiet, but it came to be dominated by weakness in the EUR and strength in the USD. This is very likely to continue over the next week due to fundamental factors. It is highly likely to be an extremely volatile week and there is a strong possibility that most brokers are going to limit trading and restrict leverage this week, especially in any EUR pairs or crosses.
There was yet another decrease in volatility this week, with only approximately 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 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 one of these key pairs last week off key support and resistance levels could have worked out:
USD/JPY
We had expected the level at 124.20 might act as resistance, 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 Wednesday’s New York session the price rose to this resistance level, then reversed very strongly with an excellent pin candle that closed close to its low, with this pattern marked at (1) in the chart. However it may be that this trade would have already reached its maximum profit, as the price seems to have bounced off possible flipped resistance to support at around 123.20.
That’s all until next week. Our next newsletter will be coming to you on Sunday 5th July.
You can trade our forecasts in a real or demo Forex brokerage account.