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 March 2014

We forecast that the pair most likely to change in value significantly during the month of March will be EUR/USD. This pair has been the strongest mover over the previous 3 months, with the exception of the CHF. Recent strong moves in the CHF have looked abnormal and suspicious, therefore we refrain from forecasting a fall in EUR/CHF.

Weekly Forecast 1^st March 2015 

There was no weekly forecast last week. This week we are tempted to forecast a fall in the CAD/CHF cross, but we will not as the CHF has been behaving strangely.

This week saw a reassertion of the bullish USD trend, and continuing strength in the GBP and weakness in the EUR. The CAD has been bullish in the short-term against its longer-term trend. Looking at the bigger picture, we see that USD, GBP and NZD look strong, while the EUR looks weak, followed to a lesser extent by CAD and AUD.

There was a small increase in volatility this week, with more than 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 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 some of these key pairs last week off key support and resistance levels could have worked out:

GBP/USD

We had expected the level at 1.5350 might act as support, 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 the price fell to hit this level during the early part of the London session last Monday, forming a very strong bullish outside candle that quickly broke to the upside. This was a very good price action signal to go long, and the price continued to rise all the way to the next anticipated resistance level at 1.5482, and eventually exceeded it.

USD/CAD

We had expected the level at 1.2650 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 the price rose to hit this level during the early part of the London session last Tuesday, forming a three candle reversal pattern: a pin, followed by a bearish engulfing candle and a bearish inside candle. This was a very good price action signal to go short when it broke to the down side, and the price fell strongly. It reached a level within a few pips of anticipated support at 1.2375. Traders wanting to stay in this trade for the long-term would be wise to watch and see whether the new resistance level at 1.2538 holds.

That’s all until next week. Our next newsletter will be coming to you on Sunday 8^th March.

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

Adam Lemon
Chief Instructor
www.fxacademy.com