Market Analysis for Week of 26 April 2015
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 April 2014
We forecasted that the pair most likely to change in value significantly during the month of April will again be EUR/USD in the short direction. This pair had 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 have refrained from forecasting a fall in EUR/CHF.
The monthly forecast has performed to date as follows:
Weekly Forecast 26th April 2015
Last week we forecast that the USD/CAD would rise in value, and that the GBP/USD would fall in value. The forecast was unsuccessful and the result was as follows:
We make no forecast this week.
This week saw a continued weakening in the USD, which is in danger of losing its status as the strongest currency over the previous 3 months. The standout currency was the GBP which rose in value across the board quite strongly. There has also been some continuing strength in the CAD and the AUD.
There was a further decrease in volatility this week, with almost two-thirds of the major and minor currency pairs fluctuating in value by less than 1%.
You can trade our forecasts in a real or demo Forex brokerage account.
Previous Monthly Forecasts
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:
We had expected the level at 1.4878 between 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 early during Tuesday’s London session the price was held more or less at this support, printing a bullish engulfing candle marked at (1). There was an immediate strong break to the upside. This trade would be doing very well and profits should be protected by now. The next hurdle can be expected at 1.5200.