Dear Friend,

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 August 2014

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

The performance so far has been somewhat negative:

Weekly Forecast 16^th August 2015 

Last week, we made no forecast, because there were simply no large counter-trend movements at all.

We make no forecast this week.

The past week, and the month of August as a whole, has seen strength only in the EUR. Weakness is spotty but seems strongest in commodity currencies such as NZD, and also in the CHF, which has a negative rate of interest and is subject to a very dovish policy from the SNB.

This week is likely to be more volatile, with key news ahead for the USD, JPY and AUD.

There was a slight decrease in volatility last week, with only 40% of the major and minor currency pairs changing 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 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:

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 0.9266 might act as resistance and the round number at 0.9100 might act as support, as both levels had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows how during Tuesday’s Asian session the price turned around at 0.9266 almost to the pip, forming a huge bearish engulfing candle that then broke to the downside, with this pattern marked at the down arrow in the chart, giving a potential profitable entry. The price then initially bottomed out at the anticipated support of 0.9100, marked by the up arrow, which could also have provided a long trade as well as an exit signal. The problem with the initial short trade is that using such a large candle to measure entry and stop loss levels gives a reward to risk ratio that is not very great.

That’s all until next week. Our next newsletter will be coming to you on Sunday 23^rd August.

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

Adam Lemon
Chief Instructor
www.fxacademy.com