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. The performance so far has been good:

Weekly Forecast 26^st July 2015 

Last week, we made no forecast.

This week, we again make no forecast, as we have only 1 strong counter-trend move in a currency cross, but we would not be comfortable being long AUD currently.

The past week was dominated by weakness in the commodity currencies of AUD and CAD, along with the correlated commodities of Gold and Crude Oil. The NZD showed a little strength relatively as the NZ authorities seem less keen for the Kiwi to continue weakening strongly, but this should not be counted on to continue.

This week, the focus will shift to the USD, and if the USD strengthens it is likely to strengthen the most against the commodity currencies.

There was a decrease in volatility this week, with just under half 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 one of these key pairs last week off key support and resistance levels could have worked out:

EUR/USD

We had expected the level at 1.0818 might act as support, 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 around the time of Monday’s New York close the price finally touched this level, then reversed forming an inside candle that then broke to the upside, with this pattern marked at (1) in the chart, giving a potential profitable entry. The price did not take off until just before the next London open, which is natural for this pair. A long trade taken at the break of that inside candle with the low as a stop loss would have achieved a profitable reward to risk ratio of more than 5:1 at the close of the week.

USD/CHF

We had expected the level at 0.9537 might act as support, 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 early in Thursday ’s London session the price fell strongly to this support level, then found support with an imperfect but bullish pin candle, with this pattern marked at (1) in the chart. A long trade taken at the break of that pin bar with the low as a stop loss would have achieved a profitable reward to risk ratio of more than 2.5:1 at the close of the week.

That’s all until next week. Our next newsletter will be coming to you on Sunday 2^nd August.

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

Adam Lemon
Chief Instructor
www.fxacademy.com