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 16 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 2018
For the month of March, we forecast that the best trades would be short USD/JPY and long EUR/USD. The performance to date is as follows:
Currency Pair
Forecast Direction
Interest Rate Differential
Performance to Date
EUR/USD
Long ↑
-1.50% (0.00% – 1.50%)
-0.10%
USD/JPY
Short ↓
1.60% (1.50% – -0.10%)
-1.04%
Weekly Forecast March 11, 2018
Last week, we made no forecast, as there were no strong counter-trend moves.
This week, we forecast that the AUD/JPY and CAD/CHF currency crosses will both fall in value, as they have just experienced very strong counter-trend movements.
This week has been dominated by relative strength in the Australian Dollar, and relative weakness in the Swiss Franc.
Volatility was lower than it was last week, with approximately 41% of the major or minor currency pairs changing in value by more than 1%. Volatility is likely to be lower still next week.
