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 July 2014

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

Weekly Forecast 26^st July 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. It is likely to be a quieter week ahead, with focus moving mostly to the NZD.

This week was lively for July, with renewed strength in the USD, and weakness in EUR, CAD and the NZD. The market is moving in trend and seems positioned to resume its long-term strong trends.

There was a strong increase in volatility this week, with about 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 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 two of these key pairs last week off key support and resistance levels could have worked out:

GBP/USD

We had expected the level at 1.5673 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows how right at the open of Wednesday’s London session the price bounced off this resistance level, then reversed forming a bearish piercing candle, with this pattern marked at (1) in the chart, giving a potential profitable entry. Note how the three candles marking the turn also made a good “V” shape. Unfortunately for those taking this trade, the move down has been quite choppy, giving a reward that so far has not been great. As both currencies within this currency pair are strong, there may not be a lot of pips profit available in trades here.

USD/CAD

We had expected the level at 1.2783 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows how during Monday ’s New York session the price rose strongly to this resistance level, then reversed quite strongly with a bearish pin candle, with this pattern marked at (1) in the chart. The price fell immediately, but seemed to stall at support, which can be seen in the chart as matching some previous highs. This was a warning sign that the price may start to rise again, which it did after a few hours, giving a trade with a profitable but admittedly low reward to risk ratio.

That’s all until next week. Our next newsletter will be coming to you on Sunday 26^th July.

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

Adam Lemon
Chief Instructor
www.fxacademy.com