This week I will begin with my monthly and weekly Forex forecast of the currency pairs worth watching. The first part of my forecast is based upon my research of the past 20 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 6 months.
- Trading against very strong weekly counter-trend movements by currency pairs made during the previous week.
- Carry Trade: Buying currencies with high interest rates and selling currencies with low interest rates.
Let us 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 March 2023
I make no forecast for the month of March, as Forex markets are unsettled.
For the month of February, I forecasted that the EUR/USD currency pair would rise in value.
The final performance was:
Weekly Forecast 5th March 2023
Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market the previous week. The situation remains the same, so I again give no weekly forecast this week.
Directional volatility in the Forex market is likely to increase over the coming week.
Last week was dominated by relative strength in the Euro, and relative weakness in the US Dollar. However, the amounts were very low, so these statistics are not very meaningful.
Key Support/Resistance Levels for Popular Pairs
I 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 can be monitored on the more popular currency pairs this week.
USD/CAD
I had expected the level at $1.3656 might act as resistance in the USD/CAD currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level right at the start of Wednesday’s Tokyo session with a large engulfing candlestick, marked by the down arrow in the price chart below signaling the timing of this bearish rejection. This trade has been profitable so far, giving a maximum reward to risk ratio of more than 2 to 1 based upon the size of the entry candlestick structure.
EUR/JPY
I had expected the level at ¥145.51 might act as support in the EUR/JPY currency cross last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level right at the end of last Thursday’s Tokyo session (typically a great time to enter trades in Forex currency crosses involving the Japanese Yen) with a small pin bar / inverted hammer candlestick, marked by the down arrow in the price chart below signaling the timing of this bearish rejection. This trade has been very profitable, achieving a maximum positive reward to risk ratio of more than 7 to 1 so far based upon the size of the entry candlestick.
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Rehana William |Financial Consultant _Forex_Gold Xauusd| Fund Manager 