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 2016
This month we forecast that the best movements will be short GBP/USD and USD/JPY. The performance so far as follows:
Weekly Forecast 10th July 2016
Last week, we made no forecast.
This week, we again make no forecast, as there were no strong counter-trend movements.
This week has been dominated by further weakness in the British Pound, and strength in the Japanese Yen and New Zealand Dollar. Last Friday's strong u.s. jobs numbers have boosted stock markets and may trigger a rally of risk assets, although the British Pound at least is likely to remain relatively weak.
Volatility was greater than it was last week, with one approximately 67% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be fairly similar over this coming week, which will be dominated by British and Canadian central bank actions, as well as some key U.S. data releases, all taking place during the second half of the week.
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:
