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

We forecasted last month that the pair most likely to change in value significantly during May would be CAD/JPY in the long direction. The performance of the forecast was positive:

This month, we are forecasting that the most likely pair to move directionally will be NZD/USD in the short direction.

Weekly Forecast 31^st May 2015 

Last week, we forecasted that the USD/CAD pair would fall in value. In fact, it rose by 1.20%.

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

This week has seen continued strengthening of the USD and significant weakness in the NZD and JPY. All the other currencies depreciated except the CHF and the EUR.

There was no change in volatility this week, with almost two-thirds 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/JPY

We had expected the level at 95.91 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 Thursday’s Asian session the price rose to this support level, then reversed strongly with a large bearish outside candle, with this pattern marked at (1) in the chart. There was then an immediate break to the downside, marked by the down arrow. Profit could have been taken just before the anticipated support level of 94.56, which worked with good accuracy as the next major resistance. Unfortunately, as this outside candle was so large, the trade did not have a good reward to risk ratio, so it would have been understandable and perhaps prudent to skip this trade.

That’s all until next week. Our next newsletter will be coming to you on Sunday 7^th June.

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

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