Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market over the previous week. This week, I again make no forecast.

This week I will begin with my monthly and weekly Forex forecast of the currency pairs worth watching. The first part of my forecast is based upon my research of the past 20 years of Forex prices, which show that the following methodologies have all produced profitable results:

Let us 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 August 2022

For the month of August, I forecasted that the EUR/USD currency pair would decline in value. The result so far is shown below:

Weekly Forecast 28^th August 2022

Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market over the previous week. This week, I again make no forecast.

The Forex market saw a strong decrease in directional volatility last week, with only one of all the important currency pairs or crosses moving by more than 1% in value. Directional volatility is likely to be higher over this coming week as there are a few major releases due, and the impact of Powel’s speech last Friday is likely to continue to drive markets as this week opens.

Last week was dominated by relative strength in the Australian and US Dollars, and relative weakness in the New Zealand Dollar.

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

Key Support/Resistance Levels for Popular Pairs

I 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 can be watched on the more popular currency pairs this week.

Let us see how trading two of these key pairs last week off key support and resistance levels could have worked out:

EUR/USD

We had expected the level at $1.0070 might act as resistance in the EUR/USD currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level following Jerome Powell’s hawkish speech near the start of last Friday’s New York session with a large bearish outside candlestick, marked by the down arrow signaling the timing of the bullish bounce. This is typically a great time of day to be entering trades in major Forex currency pairs. This trade has been profitable, but has achieved a maximum positive reward to risk ratio of less than 1 to 1 so far based upon the size of the entry candlestick.

GBP/USD

We had expected the level at $1.1878 might act as resistance in the GBP/USD currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level following Jerome Powell’s hawkish speech near the start of last Friday’s New York session with a large bearish outside candlestick, marked by the down arrow signaling the timing of the bullish bounce. This is typically a great time of day to be entering trades in major Forex currency pairs. This trade has been profitable but has achieved a maximum positive reward to risk ratio of less than 1 to 1 so far based upon the size of the entry candlestick.

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 I think we are going to see a lot of noisy behavior over the next 24 hours, before continuing for all drift higher that we have been in for a while.

The USD/CAD initially fell during the trading session on Thursday but found a little bit of support underneath the show signs of life. It’s worth noting that the 50-Day EMA is sitting just below, and a lot of traders will pay close attention to that indicator. After all, longer-term traders consider that a short-term support level.

The fact that we ended up forming a bit of a hammer during the trading session on Thursday is interesting because we had formed an inverted hammer during the Wednesday session. In other words, the market is hanging around the 1.2950 level, an area that previously has been resistant, and therefore the market is trying to figure out what we are doing next. Jerome Powell is speaking at 10 AM on Friday at the Jackson Hole Symposium, and therefore a lot of people will be looking at the speech for signs of what the Federal Reserve may do next. Unfortunately, Jerome Powell has a long history of blowing up the statements and being misunderstood, because he’s not very good at his job.

Friday Session Likely to be Noisy

• The market breaking down below the 50-Day EMA opens up the possibility of the dollar dropping down to the 200-Day EMA, underneath the 1.28 level. On the other hand, if we can take out the 1.30 level on a daily close, it opens an attempt to reach the 1.32 handle.
• When you look at the longer-term chart, you can see that we have been drifting higher in a bit of a channel, and I would assume we you to do the same over the longer term.
• The session on Friday is likely to be very noisy.

The oil market has a certain amount of influence on the Canadian dollar as well, so if it starts to rise that may bring this pair down. However, all things lead to the Federal Reserve before it’s all said and done, so if we get some type of overly hockey statement, that could send this pair higher, just as more fumbling by Jerome Powell could send the market lower. I think we are going to see a lot of noisy behavior over the next 24 hours, before continuing for all drift higher that we have been in for a while.

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• BTC/USD has drifted a little bit lower during the trading session on Monday, losing 1%.
• We are sitting in an area that has been supported a couple of times in the past, and now looks to be important from a short-term perspective.
• The $21,000 level has been an area that people have been fighting over for a while, so it does make a certain amount of sense that we would see this market mess about in this area.

I anticipate that there is probably a lot of support extending down to the $20,000 level, so in this area, I would anticipate that there probably will be plenty of buyers. However, if we do break down below the $20,000 level, it is likely that the Bitcoin market will start to fall rather drastically, and probably drag the rest of the cryptocurrency market with it. It is worth noting that the US dollar is strengthening quite drastically, and therefore will have an effect on Bitcoin. Furthermore, as monetary policy continues to tighten, people will worry about risk appetite. Risk appetite falling leads to lower pricing of Bitcoin and other cryptos in general.

Rallies at this point will more likely than not end up being looked at with suspicion, with the 50 Day EMA sitting just below the $24,000 level offering a bit of resistance. Beyond that, we have the $25,000 level, which has recently offered quite a bit of selling pressure. Because of this, I think you need to keep looking at this market through the prism of one that is in a downtrend, and that has not changed. In fact, it’s very likely that we will continue to see a lot of negative pressure, and a breakdown below the $20,000 level could kick off a bigger move to the downside. If that happens, we could see Bitcoin unwind all the way down to the $12,000 level over the longer term. It is worth noting that the $12,000 level with where the entire bullish run had kicked off from.

On the upside, if we can clear the $25,000 level, then it’s likely that we will go looking to reach the $28,000 level, which is the beginning of a major area of noise that extends all the way up to the $32,000 level.

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This week I will begin with my monthly and weekly Forex forecast of the currency pairs worth watching. The first part of my forecast is based upon my research of the past 20 years of Forex prices, which show that the following methodologies have all produced profitable results:

Let us 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 August 2022

For the month of August, I forecasted that the EUR/USD currency pair would decline in value. The result so far is shown below:

 

Monthly Forex Forecast Performance

Weekly Forecast 14^th August 2022

Last week, I forecasted that the NZD/USD currency pair would fall in value over the week, as it made a strong counter-trend price movement over the previous week.

This was a great call, as the NZD/USD fell by 4.26% over the week.

The Forex market saw a slight decrease in directional volatility last week, with 52% of all the important currency pairs or crosses moving by more than 1% in value. Directional volatility is likely to be lower over this coming week as although there are a few key news releases scheduled, we are unlikely to see any with a very strong impact on the market, possibly excepting a surprise in the forthcoming US preliminary GDP data release.

Last week was dominated by relative strength in the US Dollar, and relative weakness in the New Zealand Dollar.

 

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

Key Support/Resistance Levels for Popular Pairs

I 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 can be watched on the more popular currency pairs this week.

Key Support and Resistance Levels

Let us see how trading two of these key pairs last week off key support and resistance levels could have worked out:

USD/JPY

We had expected the level at 132.65 might act as support in the USD/JPY currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 chart below shows how the price rejected this level right at the start of last Monday’s New York session with a doji candlestick, marked by the up arrow signaling the timing of the bullish bounce. This is typically a great time of day to be entering trades in major Forex currency pairs. This trade has been extremely profitable, achieving a maximum positive reward to risk ratio of more than 13 to 1 so far based upon the size of the entry candlestick structure.

USD/JPY Hourly Price Chart

EUR/JPY

We had expected the level at 134.97 might act as support in the EUR/JPY currency cross last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 chart below shows how the price rejected this level right at the start of last Tuesday’s Tokyo session with a bullish hammer candlestick, marked by the up arrow signaling the timing of the bullish bounce. This is typically a great time of day to be entering trades in Forex currency crosses involving the Japanese Yen. This trade has been nicely profitable, achieving a maximum positive reward to risk ratio of more than 5 to 1 so far based upon the size of the entry candlestick.

 

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We will see a lot of choppy and sideways behavior, meaning that you should probably be looking more or less at a range-bound type of trade.

• The AUD/USD currency pair pulled back a bit Tuesday to test the 0.70 level. 
• It should be noted that the 0.70 level has been important multiple times in the past, so it does make quite a bit of sense that the market would stall here.
• The question now is where we go from here, as this was the scene of a rather significant breakout.

The 0.70 level of course has a lot of psychology attached to it, so in and of itself is reason enough to think there might be some trouble. If we break down below the bottom of the candlestick for the trading session on Tuesday, then it’s likely that we go lower, perhaps reaching the 50-Day EMA. The 50-Day EMA is closer to the 0.6925 level, and of course, we have seen support at the 0.69 level previously. In other words, there is a lot of noise underneath that could come into the picture and keep the market somewhat elevated.

Tied to the US Dollar

At this point, it’s probably worth noting that the Australian dollar has fared better against the US dollar than many other currencies, so if we are going to see the US dollar selloff, it’s likely that we will see it get turned around here first. The market breaking above the 200 Day EMA above would be a very bullish sign, perhaps kicking off a new bullish trend.

We will have to be very cautious about that though because the Australian dollar is highly levered to China, which seems to have a lot of its own problems right now. Furthermore, we also have to worry about risk appetite in general, because the US dollar could pick up a bit of a bid if people start freaking out. I think more than anything else, we will see a lot of choppy and sideways behavior, meaning that you should probably be looking more or less at a range-bound type of trade. In the next 24 hours, it does look like we are going to deal with a little bit of support that could cause his market to bounce, albeit ever so slightly. This is a market that continues to see a lot of crosscurrents, but you can probably say that about almost every currency pair at the moment. Pay attention to the 10-year yield in America, because if it starts to rise again, that could send the Aussie lower.

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As a general rule, lower interest rates tend to favor the Japanese yen, which is what we are seeing as of late.

• The US dollar pulled back a bit against the Japanese yen in early Monday morning trading only to turn around and show signs of support.
• By doing so, the USD/JPY currency pair looks very likely to continue going back and forth, with the ¥133 area offering a bit of support.
• In fact, the ¥132.50 level seems to be even more remarkable when it comes to buying pressure, so I think we are essentially “stuck in this area” for the time being.

USD/JPY Technical Analysis

Ultimately, the 50-day EMA sits above the crucial ¥135.50 level, and I think will continue to offer a little bit of a technical barrier. Because of this, I will be looking at that as a gateway to much higher pricing, and if the US dollar can climb above that level, it’s very likely that this market would continue to see quite a bit of bullish pressure. Ultimately, the dollar could go looking toward the ¥140 level, which is an area that I think offers psychological and structural resistance based on historical charts.

On the other side of the equation, if we were to break down below the ¥132.50 level, we could go looking all the way down to the ¥127 level for support. I would also anticipate that the ¥130 level will at least be of psychological importance, so we could see noise in that vicinity as well. I do believe that given enough time, this is a market that continues to be very noisy to say the least, so you have to be cautious about your position sizing, but it’s obvious that it’s going to be much easier to go to the uptside than to the down, as it is with the longer timeframe trend.

The interest rate differential in the United States continues to favor the greenback over the yen, but if it appears that the Federal Reserve will have to be a little bit looser with its monetary policy than once anticipated, that could put downward pressure on this market. As a general rule, lower interest rates tend to favor the Japanese yen, which is what we are seeing as of late. In other words, the old correlations still remain, and it makes a certain amount of sense that we would see this play out in the same way.

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For three trading sessions in a row, the GBP/USD currency pair is subjected to selling operations, as a result of which it settled around the 1.2105 support level. It is close to testing an important support 1.2045, which supports more bears’ control of the trend. The gains of the GBP/USD last week brought it to the resistance level of 1.2277, but as I mentioned many times before, the gains of the currency pair will remain subject to selling as long as the US dollar is strong with the expectations of raising the US interest rate and the investors’ demand for it as a safe haven. On the other hand, sterling is in the position of worrying about a strong recession in Britain, as well as worrying about the future of political life in the country.

According to the fundamental analysis, the GBP/USD is trading affected by the announcement that the UK’s primary GDP for the second quarter exceeded the expected change (Quarterly) by -0.2% with a change of -0.1%. The Equalizer (YoY) also beat expectations at 2.8% with a 2.9% reading, while June GDP beat expectations (MoM) at -1.3% with -0.6%. On the other hand, Industrial Production for June came in stronger with -0.9% (MoM) change vs. -1.3% expected. Industrial production for June also outperformed both estimates (MoM) and (YoY) at -1.8% and 0.9% respectively with readings of -1.6% and 1.3%.

From the US, the Michigan Preliminary Consumer Confidence Index for August exceeded expectations at 52.5 with a reading of 55.1. Initial jobless claims exceeded 263 thousand with 262 thousand, while continuing claims lost 1.407 million with 1.428 million.

GBP/USD Technical Analysis

In the near term and according to the hourly chart, it appears that the GBP/USD is trading within a descending channel formation. This indicates a significant short-term bearish momentum in market sentiment. Therefore, the bears will look to extend the current declines towards 1.2107 or lower to 1.2067. On the other hand, the bulls will target short-term profits at around 1.2164 or higher at 1.2204.

In the long term and according to the performance on the daily chart, it appears that the GBP/USD currency pair is trading within an ascending channel formation. This indicates a long-term bullish slope in market sentiment. Therefore, the bulls will look to extend the current gains towards 1.2294 or higher to 1.2466. On the other hand, bears will look to pounce on profits at around 1.1980 or lower at 1.1806 support.

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Get our trading strategies with our monthly & weekly forecast of currency pairs worth watching using support & resistance for the week of August 15, 2022.

This week I will begin with my monthly and weekly Forex forecast of the currency pairs worth watching. The first part of my forecast is based upon my research of the past 20 years of Forex prices, which show that the following methodologies have all produced profitable results:

Let us 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:

Currency Price Changes and Interest Rates

Monthly Forecast August 2022

For the month of August, I forecasted that the EUR/USD currency pair would decline in value. The result so far is shown below:

 

 

Monthly Forex Forecast Performance

Weekly Forecast 14^th August 2022

This week, I forecast that the NZD/USD currency pair will fall in value over the week, as it made a strong counter-trend price movement last week.

The Forex market saw a much higher level of directional volatility last week, with 59% of all the important currency pairs or crosses moving by more than 1% in value. Directional volatility is likely to be at least a little lower over this coming week as although there are some key news releases scheduled, we are unlikely to see anything with as strong an impact on the market as last week’s US CPI data release.

Last week was dominated by relative strength in the Australian Dollar, and relative weakness in the US Dollar.

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

Key Support/Resistance Levels for Popular Pairs

I 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 can be watched on the more popular currency pairs this week.

Let’s see how trading one of these key pairs last week off key support and resistance levels could have worked out:

AUD/JPY

We had expected the level at 93.24 might act as support, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 chart below shows how the price broke above this level right at the the start of last Monday’s Asian session, and then tested it and rejected it from above with an engulfing candlestick marked by the up arrow signaling the timing of the bullish bounce. This trade has been very profitable, achieving a maximum positive reward to risk ratio of more than 3 to 1 so far based upon the size of the entry candlestick structure.

AUD/JPY Hourly Price Chart

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The USD/JPY currency pair is likely going to continue to see this area just below as support, and we will have to pay close attention to it. 

• The CPI number came out to 0.0% month over month on Wednesday morning, and the Core CPI figure came out at 0.3% month over month.
• This was lower than anticipated, so traders started to bet that the Federal Reserve is closer to pivoting than they originally thought.
• As a result, interest rates started to drop across the board, just exactly what the Japanese yen needs to see.

Market Likely to Go Higher in Long Term

Remember, the Bank of Japan continues to buy 10-year Japanese Government Bonds, keeping the interest rate down to the 0.25% level. Every time they have to buy more bonds, they are essentially “printing yen.” This is what is known as quantitative easing, while other central banks around the world are doing quantitative tightening. With that in mind, it’s essentially a “perfect setup” for this market to go higher over the long term as long as that’s going to be the situation. This is why the CPI number was so important for the day.

That being said, inflation is still running over three times what the Federal Reserve is aiming for, so they are still going to be aggressive, and we are already starting to see the US dollar pick up a little bit of momentum. You are not seeing it as much here as you are against the euro and the British pound, but we have bounced. With that being the case, the USD/JPY currency pair is likely going to continue to see this area just below as support, and we will have to pay close attention to it. If we do break down below the ¥132.50 level, it’s possible that we go looking to the ¥127.50 level.

The market breaking through all of that would of course be extraordinarily negative, and at that point in time I think the trend is over. On the upside, we have the 50-day EMA sitting at the top of the candlestick for the trading session on Wednesday which could be a little bit of a short-term technical barrier, but I feel that it is only a matter of time before we reach above that area. If and when we do, that could kick off the next move higher. At that point, I think we go looking toward the highs again, giving us an opportunity to test the ¥140 level.

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The USD/BRL fell to fresh lows on Monday and then demonstrated rather consolidated price action as important support levels came into sight.

When the USD/BRL opens today it could potentially be hit with a sudden burst of activity and traders need to be cautious early in the day. Yesterday’s results saw the USD/BRL currency pair close near the 5.1250 mark and this outcome kept price action within sight of important support levels not sincerely seen since the middle of June.

While the results from Monday are intriguing, today’s outcome could produce equally fascinating speculative opportunities for USD/BRL traders. The USD/BRL has produced a solid amount of bearish price action since the first week of August. A high of nearly 5.3160 was seen on the 3^rd of August. Traders should note that reversals upward have occurred too, this has not been a one way direction.

On the 21^st of July the USD/BRL was trading near the 5.3100 ratio. The bearish price action in the Forex pair has been clear since then, but again pursuit of selling positions has not be a clear path to victory for traders, risk management has been essential to produce solid trading results. Yesterday’s trading which saw the USD/BRL trade lower than its outcome demonstrated on Friday, which saw volatile conditions via a sudden burst higher to nearly 5.2800 and then a strong drop to nearly 5.1500 is noteworthy.

Current Support Ratios Need to be Monitored Closely as Values from June are Tested

The U.S will release key inflation data today and if the Consumer Price Index numbers are stronger than expected this could spur on short term buying of the USD/BRL. Today’s outcome from the U.S CPI numbers will produce sudden fireworks across Forex and the USD/BRL is certain to be effected by the results as financial houses react to the news.

• Support near the 5.1025 level could prove important; if this number proves vulnerable the USD/BRL could see more selling and the 5.0800 ratio become a target.
• If U.S CPI numbers are stronger than expected, the USD/BRL could produce a burst higher and resistance near the 5.1600 to 5.1800 levels should be watched diligently.

Cautious USD/BRL Trading Techniques could be Worthwhile before U.S data is released

The USD/BRL is trading near crucial support levels, but the publication of the U.S economic data will certainly create fast conditions for the USD/BRL based on the outcome.  The USD/BRL has certainly enjoyed a rather solid bearish cycle since the 21^st of July, and today’s inflation data from the U.S may be a key for the currency pair over the near term.

If data meets expectations the USD/BRL may maintain its bearish mode and see support below tested. Traders need to be careful today and cautious traders may want to see the outcome of the U.S inflation data and let the USD/BRL calm down before attempting to pursue positions.

Brazilian Real Short-Term Outlook

Current Resistance:  5.1520

Current Support:  5.1049

High Target: 5.2030

Low Target:  5.07800

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