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 October 2015

This month we forecast that the most probable movement is short AUD/JPY:

Weekly Forecast 4^th October 2015 

There was no forecast last week.

This week, we make no forecast, as there were no strong counter-trend movements over the past week.

This week saw the focus move away from the USD, with relative strength in the JPY and to a lesser extent the EUR, and relative weakness in the AUD and to a lesser extent the NZD and GBP.

Volatility was very low last week. 85% of the major and minor currency pairs changed in value by less than 1%. Volatility is likely to be higher this week as there are several major Central Bank data releases scheduled.

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

Previous Monthly Forecasts

We made no forecast in September.

Our forecast for August 2015 was short AUD/USD. The forecast performed positively, as shown below:

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 two of these key pairs last week off key support and resistance levels could have worked out:

AUD/JPY

We had expected the level at 0.8296 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 just after the open of Tuesday’s London session the price bounced off this support level, and reversed forming a large bullish outside candle, marked by the up arrow. This could have given a nice long entry, and so far has produced about 130 pips for approximately 80 pips of risk, an acceptable although unspectacular reward to risk ratio, assuming a stop loss placed just below the low of the candle.

EUR/JPY

We had expected the level at 135.02 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 just after the open of Wednesday’s Asian session the price bounced off this resistance level, and reversed forming a pin candle followed immediately by a bearish engulfing candle, marked by the down arrow. Although the price came back a couple of times, it eventually fell. This could have given a good short entry, and so far has produced a winning reward to risk ratio of about 4 to 1, assuming a stop loss placed just below the low of the candle.

That’s all until next week. Our next newsletter will be coming to you on Sunday 11^th October.

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

Adam Lemon
Chief Instructor
www.fxacademy.com