To increase their chances of success, traders need to predict forex trends to predict the price of a currency and make the right decision at the right time.

Before we go any further, we need to answer the question – what is the Forex market? It is a global decentralized marketplace for trading currencies.

Moreover, it is the largest market in the world, processing trillions of dollars of transactions every day. Its key participants are international banks, hedge funds, commercial companies, various central banks and, of course, brokers and investors.

Returning to the question of forecasting, a Forex trader who wants to be successful must understand the factors that can affect the movement of the currency rate.

Remember - there is no definitive formula - how to predict exchange rates - it all depends on your own skills, experience and desire for success. Five factors you need to understand:

• Economic Growth
• Geopolitics or Political Stability
• Monetary policy
• Import & Export
• Interest Rates

If you scrupulously follow all the events in the micro and macro economy, you have a much better chance of success in your predictions. But you have to understand that it's not easy.

There are different sites that offer so-called free Forex market predictions, but they should be avoided. We have prepared this article to help you apply your knowledge of the Forex market so that you can make a forecast of the exchange rate in the most appropriate way.

Forex Trend Identification and Forecast

The ability to recognize a trend is one of the basic skills that a forex trader must possess as it will come in handy when forecasting in the forex market.

Trends can vary depending on their duration:

• Short-term trend
• Medium-term trend
• Long-term trend

In the context of a good trading strategy, you need to know:

• What is a Forex trend?
• How to interpret it
• How to Anticipate a Trend Change

The ability to identify the trend is the most important. In the context of a general forex trading strategy, it is best to follow the trend.

If the overall trend of the forex market is moving upwards, you should be careful and attentive when making decisions that may rely on a trend going in the exact opposite direction.

The trend can also be applied to interest rates, stocks, and indices – and to any other market that may be characterized by movement in volume or price.

To predict the Forex market well, you need to know three main types of trend:

• Uptrend
• Downtrend
• Sideways trend (flat).

For example, if the trend is moving upwards in relation to the chart, then the selected currency (the US dollar) is indeed increasing in value and vice versa with a downtrend.

If the trend moves downwards in relation to the chart, it depreciates. As for the sideways trend, currencies are not depreciating or rising in value – they are in a stable state. Knowing all of this is an additional key to a correct Forex prediction.

Forex Trend Forecast - How to Predict Forex

There are many ways to analyze the forex market in the context of trading. Analysis is essential to identify good trading opportunities.

We'll take a look at the two main areas of analysis in Forex and learn even more about them. They are closely related to the correct prediction of Forex trading.

It's also important to emphasize that testing both areas of analysis will help determine which method – or which combination – fits your personality.

Forex Forecast - Basic Techniques

When you start trading, you should have at least a rough idea of which way the market will move, that is, you should have the most likely forecast.

As statistics show, those traders who regularly use fundamental analysis tools in their trading show better results, in particular, the ratio of profitable trades to unprofitable ones is higher for them than for those traders who do not know how to predict the Forex market.

Therefore, we strongly recommend that you learn the methods of forecasting the foreign exchange market before you start trading currency pairs.

Forex Forecast - Overview of the Main Methods

Traders can use several methods to predict the Forex market. It is best to use them in combination, as each of them analyzes different aspects of the foreign exchange market.

Each of the methods allows traders to understand the principles of the foreign exchange market, as well as the mechanisms by which different events affect traders and price behavior. As we have already mentioned, technical and fundamental analysis is most often used for forecasting.

These two methods are completely different, but together they show traders a complete picture of the foreign exchange market — what currency quotes depend on, and in which direction they will change.

Once again, we would like to remind you that professional traders combine these two methods to get the most complete picture of the foreign exchange market and, accordingly, the best results.

The first method of forecasting in Forex, which we will talk about in this article, is technical analysis. It is based on the three main principles of foreign exchange market activity and compares current and past trends, events, and factors. Technical analysis calculates supply and demand, as well as the current and past market situation. In the financial world, there is an opinion that quotes are a mirror image of what is happening in the world. No wonder they think so!

The trend, i.e. the trend of price movements, is one of the most important aspects that technical analysis relies on. It identifies certain patterns of price behavior in the Forex market.

What does that mean? That the price often moves in one direction for a certain period of time. This direction is called a trend. For this reason, so much attention is paid to trend analysis in technical analysis, because by studying it, you can easily predict price behavior. The next important aspect that is taken into account when creating Forex price predictions is the history of price movements. Many scientists have already proved that history tends to repeat itself.

That is, the market has a cyclical nature, so knowing past patterns of price behavior, it is not difficult to predict their behavior in the future.

The third important aspect that technical analysis works with is charts. On the charts, you can find a lot of useful information for forecasting the foreign exchange market: indicators, trend, gaps, waves, as well as number theory.

For novice Forex traders, charts will not be so easy to understand, but professional traders who have already figured them out clearly understand and analyze them, getting a better feel for the foreign exchange market, and skillfully using the information received in trading currency pairs.

Forex forecasting is not just about technical analysis. Another important type of analysis of the foreign exchange market is fundamental analysis. Brokers and professional traders always use this method, along with technical analysis, to predict trends in the foreign exchange market.

What is the meaning of fundamental analysis? It determines the impact of various economic and geopolitical events on the value of a currency. These events can include releases of major economic indicators, wars, political news, and sometimes even natural disasters provoke a sharp jump or fall in the value of the currency.

In order to understand what the quote of a particular currency pair will be, you must understand whether there is a relationship between this currency pair and a particular event. If such a relationship exists, you can determine its strength, as well as the direction in which the price will change under the influence of this event. Statistical data are already being used for this purpose.

Basic analysis involves a deep understanding of macroeconomic processes, so if you are very far from macroeconomics, it will not be easy for you to figure it out yourself. In addition, this method should not be used separately, as it can only suggest the general direction and approximate strength of the price movement.

Only technical analysis can tell you specific entry-exit signals and possible risks. Therefore, to predict the foreign exchange market, we advise you to use fundamental analysis along with technical analysis. Then you will have a much better chance of getting a high-quality and reliable forecast of the foreign exchange market.

It is very important for all participants in the foreign exchange market to understand how the market itself works and the tools that can be used for profitable trading. It is by knowing and owning the basic tools that you can create Forex forecasts and trading signals. And they, in turn, help traders trade more profitably.

Experienced traders, as well as brokers, can use technical and fundamental analysis to make trading decisions in the foreign exchange market. By using both of these analyses together, the trader learns all the necessary information about the most likely price movement.

It is not easy to make a high-quality forecast of the foreign exchange market, but if you master the basic forecasting methods and increase your knowledge of the foreign exchange market, it will be much easier for you to do it.

Forex Forecast - 5 Analysis Factors

If you've traded forex before, you know that it's not always possible to win. You've also probably figured out that a good trading method involves

• Money Management
• Trader's Psychology
• Forex Technical Analysis
• Fundamental analysis of the Forex market

From a fundamental point of view, there are 5 factors that directly affect the exchange rates and can help you anticipate the Forex trend and make a fairly fair EUR USD prediction:

• Economic Growth
• Geopolitics or Political Stability
• Monetary policy
• Import & Export
• Interest Rates

Whether you're a long-term or short-term trader, it's important to have an understanding of the fundamental factors that affect the currency pair you want to trade. To do this, it can be interesting to familiarize yourself with the economic calendar and learn how to trade with the economic calendar.

Forex Currency Rate Forecast Using Fundamental Analysis

Forex fundamental analysis concentrates on a variety of factors that affect the foreign exchange market.

Fundamental analysis in Forex focuses on several different fundamental factors, such as:

• GDP (Gross Domestic Product)
• Inflation
• Economic Growth

Thus, fundamental analysis in Forex involves studying the economic power of different countries in order to make reasonable predictions about the exchange rate of Forex.

This gives us information about the impact of geopolitical and economic events on the foreign exchange market. For example, some figures and statements by politicians or economists are classified among traders as specific economic announcements. This can seriously affect the movement of the foreign exchange market. In fact, announcements related to the economy or politics in the U.S. are crucial.

All this information is available in the economic calendar. On the website of every forex broker, they often have an economic calendar that publishes real-time news expected by the markets. These announcements can be more or less important and differ depending on their impact on the chosen forex pair.

And so we come to the question of how to predict the Forex market? Fortunately, economists have created a standard economic calendar in which they forecast various economic values based on recent events on a daily basis. It typically contains the following data: date, time, currency, published, actual, forecast, and previous.

There are certain economic indicators that almost always have a strong influence on the movement of the foreign exchange market. Among them:

• Interest Rates
• Employment situation
• Budget, Trade Balance and Treasury Budget
• GDP (Gross Domestic Product)

Traditionally, when a certain country raises its interest rate, its currency will consequently strengthen due to investors moving their assets to that country in order to earn higher returns. Be sure to take this into account when trading Forex.

The rise in the unemployment rate is one of the signs of weak economic growth, which could eventually lead to lower interest rates. This can have a negative impact on the currency. A country that has a substantial trade deficit is likely to have a weak currency.

GDP is the primary identifier of the strength of economic activity. There is a correlation between the high GDP indicator and expectations of higher interest rates, which refers to positive factors for the currency in question.

For example, let's analyze how to trade the euro to the dollar.

To predict the main trend of the euro dollar exchange rate, it will be necessary to look at the economic news of the Eurozone and the United States. For example, the publication of the NFP, the Non Farm Payroll report has a significant impact, as a rule, on the euro-dollar market, and by following this data, you will be able to get an idea of the underlying trend on this currency pair.

The same principle can be applied to the publication of GDP, inflation and economic growth. If we have good GDP figures in Europe and good economic growth, we can expect the price of the euro to rise against other currencies.

In addition, the same principle of fundamental analysis applies to stock market indices such as the CAC 40 and DAX 30. For indices, anticipating the trend of the stock market is usually a bit easier than in forex.

Here are some other economic indicators available on the trading calendar.

• Interest Rates
• Employment situation
• Budget, Trade Balance and Treasury Budget

Traditionally, when a certain country raises its interest rate, its currency will appreciate due to the fact that investors will change their assets and put more funds into that currency – so they will buy more.

The interest rate is really the most important factor in determining the price of a currency, and if you want to trade forex, you should follow the announcements on the ECB's key rates, for example, or the Fed's minutes. ,

A significant reduction in wages is a warning sign of weak economic activity, which could eventually lead to lower interest rates. This can have a negative impact on the forex pair.

A country with a large trade deficit is likely to have a weak currency. GDP is a key indicator of the strength of economic activity. There is a correlation between GDP growth and the possibility of interest rate hikes, which is a positive factor for this currency.

How can a trader use all the above-mentioned points to make forex predictions?

First, always follow the economic calendar.

Then you should also understand the basics of technical analysis and price action. Fundamental analysis alone can give you a good trend for predicting currency pairs, but you need to combine it with technical analysis to better capture the time to enter a position.

Forex Currency Forecast - Technical Analysis

The essence of technical analysis is that it is used to determine future price behavior based on historical data. The idea of technical analysis is that markets are cyclical, that is, history repeats itself and the trader's task is to identify cyclical patterns in Forex. In turn, such patterns are called trading signals.

Technical analysts tend to believe that price fluctuations are not random or unpredictable. Once a certain type of trend is formed, it will continue for a certain period of time.

Forex traders can use volume charts, price charts, and other mathematical representations of market data (hereafter referred to as research) to discover the ideal entry or exit points for a trade. This is something that can help a trader learn how to predict in Forex.

Some of these studies help recognize a trend, while others help determine the strength and stability of that trend over time.

Technical analysis can increase discipline and reduce the influence of emotions in your trading plan. It can be quite difficult to keep track of fundamental influences and stick to entry and exit points according to your plan.

Even though the system is not perfect, technical analysis gives you what you need for daily Forex analysis and forecasting and allows you to evaluate your trading plan more objectively

Technical analysis can help you identify the trend, determine the strength and stability of the trend over time. Technical analysis can increase discipline and reduce the influence of emotions in your trading plan. While no system can guarantee you a 100% success rate in identifying a forex trend, technical analysis can help you create a trading plan and track it more objectively.

Now it's time to define the technical types of indicators.

Forex Forecasts - Indicators for Forecasting

Now, let's take a look at how to predict a Forex trend using technical indicators.

First, there are trend indicators. These indicators smooth out price data, often with the help of moving averages. The advantage of these indicators is that they can produce fewer false signals. The disadvantage is that they can have a significant delay - this kind of indicators should be used rather in long-term trading strategies and to predict the long-term Forex rate.

Your job is to detect the dominant trend in the market with the help of trend indicators. The most well-known trend indicators are:

• Moving Average
• MACD
• Volume Indicator

When a particular trader uses technical analysis with fundamental analysis, they can better understand the Forex market and better anticipate the movements of currency pairs. Learning forex trading forecasts can be time-consuming, and there is certainly no magic formula. You can start with a Forex trading simulator.

The next is volatility, which refers to the magnitude of daily price fluctuations. No matter what the trend direction is, changes in volatility are expected to be equal to price changes.

Next, we will move on to the cycle indicators. They identify recurring patterns in the foreign exchange market from recurring events such as elections.

The Cycle Forecast Indicator identifies the moment of a particular Forex market pattern. It would be unwise if we didn't mention support and resistance – they describe price levels where markets often rise or fall, and then vice versa. Finally, the last one on our list is momentum.

These indicators determine whether a trend will be strong or weak after it has progressed over a period of time. Momentum is highest when the trend starts and lowest when it changes.

Short Term Forex Forecast Online

If you want to get into short-term forex trading, it is likely that fundamental analysis will not be a sufficient tool because in this case, the timing of entry into a position is important.

Among forex technical indicators, we can find oscillators, which are indicators often used in short-term trading and to identify trend changes.

An oscillator is a technical analysis indicator that is limited to two extreme values (e.g., 0 and 100) and gives an indication that the market is oversold or overbought.

If the value of the oscillator approaches the value of a higher extreme value, then as a result, the asset is considered to be overbought, and if it is in the lower bound, you may think that the currency pair is oversold.

These indicators can be most beneficial when we can't see a clear trend, such as when the market is in a range. The Stochastic Oscillator, RSI, and ROC are the most commonly used oscillators in the Forex trading community.

Forex Trend Forecast

Forex trading analysis is an integral part of your trading. The simpler and more convenient this analysis is, the better you can continue trading without changing your Forex forecasting method!

Here are 3 approaches to predicting the euro against the dollar or even the GBP USD

• Heiken Ashi Trend Forecast

Heiken Ashi is a free Forex indicator present in MetaTrader 4 and MetaTrader 5. You can use this indicator to quickly find the trend of the Forex day!

Thus, you can make a forecast for the EUR/USD Forex pair for tomorrow, referring to the daily chart.

• EURUSD Forecast with Resistance and Support

Forex analysis in support and resistance levels helps to identify areas of interest to Forex traders.

Resistance becomes support after the crossover, while support becomes resistance after the crossover.

This free Forex technical analysis gives us the ability to predict the Forex market!

As soon as this level drops, you will be able to predict the test of the next level, but this time as resistance.

Likewise, the support level of 1.2390 supports twice the price before crossing it, and as you can see in the far left corner of the EURUSD CFD chart, this level has played a resistance role in the past.

• Predicting forex price action using Elliott Waves:

Elliott Waves are a pattern that is bound to repeat itself in the financial markets. It is impossible to say exactly when there will be a repetition and with what criteria, but it is enough to allow traders to make Forex predictions! This Elliott Wave Cycle usually consists of one part of 3 pulse waves with 2 corrective waves included in the overall bullish movement.

You will find the first impulse under the big left green arrow, this is the first impulse wave, followed by a retracement wave, immediately followed by a new impulse, a correction, and finally the last upward impulse.

This cycle, of course, is downward in the same way.

Of course, this example is not perfect, but it is illustrative! The market is not perfect, you will deal with waves of this type more often than the perfect waves that can be found in the Elliott Wave Theory of Forex.

Forex Forecasts - Purchasing Power Parity

This method is perhaps the most popular because of its inclusion in economics textbooks. Purchasing power parity means that goods must have the same prices in different countries.

This means that there is no possibility of long-term arbitrage. Purchasing power parity in the context of the forex market means that real exchange rates will be adjusted to account for interest rates between different countries.

For example, if inflation in Europe is higher than expected, and prices remain unchanged in Canada, the euro will have to depreciate.

Purchasing power parity, as a method of forecasting in Forex, allows you to predict how much the exchange rate will change due to inflation.

Here's a simple example.

In the UK, prices are expected to rise by 5% over the next year, while in Japan they are expected to rise by 2%. It turns out that the difference in inflation between one and the other country is 3%.

And what does that mean?

This means that prices in the UK will rise much faster than in Japan, so the British pound will need to be devalued by 3% in order to maintain a balance between prices in one country and prices in another country.

Forex Forecast - How to Predict Currency Rates with Relative Economic Strength

This method allows you to create a forecast of the Forex exchange rate and determine the strength of economic growth in different countries and its impact on the direction of currency quotes.

What is the meaning of this method? The higher the economic growth and the more favorable the economic environment, the more likely it is that foreign investment will be attracted to that economy. And with these investments in the economy comes the currency. After all, in order to invest money in this country, an investor must first of all

purchase the national currency of this country. The demand for a currency increases, and because of this, the value of this currency also increases.

In the same way, the value of a currency rises when interest rates rise. This indicator is always watched very closely by investors as they prefer to invest money where they can get the maximum return on their investment, naturally with reasonable risks.

Therefore, it turns out that high interest rates increase the interest of investors and demand for this currency, which contributes to its rise in price.

Otherwise, the reverse process is triggered: low interest rates force investors to withdraw money from this country, because they can invest the same money in another country, with higher interest rates, and receive much higher income. It is more profitable for them to borrow a currency with a low interest rate to finance their investments and invest it in a country with a high interest rate.

Relative economic strength, unlike PPP, does not indicate the exact value of a currency quote, it only indicates the most likely direction of a currency's behavior – appreciation or depreciation, as well as how strong it will be.

How to Make Forex Forecasts with Econometric Models

This method is not for beginners.

It involves applying econometric models in past currencies to predict exchange rates. Econometric analysis software, such as SPPS or Matlab, is used.

The factors used in econometric models are usually based on economic theory, however, any variable can be added if you think it could have a significant impact on the forex rate.

Forex Forecast Online and Time Series Model

The last method is the time series model. This is an absolutely technical method, it has nothing to do with economic theory.

Moving average autoregression is the most popular approach of the time series concept. It uses historical data and price models to predict the most likely price behavior in the future.

How to Make a Forex Forecast Using a Chart Pattern

You probably know that a chart of the value of a security is a starting point for analyzing future price movements. Even those who are skeptical of technical analysis still use charts in their forex trading to some extent.

There is one simple explanation for this – Forex charts provide traders with a large amount of useful information in limited periods of time.

For example, if you look at a company's 4-year chart, you can see at a glance how productive shareholders were during that time period. You'll also be able to determine the volatility of a particular company's stock just by looking at the movements on the chart.

Where are we going? There is a huge variety of currency trading methods available in the market. By choosing the most optimal method for yourself, you can save a lot of time, money, and effort.

Using popular and simple approaches, a trader can create a complete trading plan using Forex chart trading patterns. These patterns often appear on the chart and can be easily spotted if you already have a little experience.

Charts, including Ichimoku and candlestick patterns, can provide you with visual clues as to when the best time to trade is. While these methods are sometimes very complex, there are other, simpler methods that take advantage of the most popular elements of these patterns.

Two other commonly used chart patterns are head and shoulders and triangle. We will talk about them below.

Head and Shoulders Price Pattern and Forex Forecast

You've probably come across this pattern before. It is very popular and easy enough to spot. In addition, this pattern appears on all time frames and hence can be applied every day.

And with entry levels, stop levels, and target prices, pattern patterns are easy to use in trading, as the Forex chart pattern provides significant and easily identifiable levels.

Let's take a look at how the head and shoulders figure is formed:

• Left shoulder – A rise in prices is accompanied by a left price peak, followed by a decline.
• Head – the price rises and forms a peak again, higher than the previous one.
• Right shoulder – there is a decline again, after which a right peak is formed, which is relatively lower than the head.

In the case of an inverted head and shoulders, the process of forming a Forex pattern is the same as we described above, but in the opposite direction.

It is important that traders wait for the pattern to complete, i.e. the moment when a cutout or trend line appears that connects the two highs in the lower pattern, or the two lows in the upper formation pattern. You need to observe both completed and partially completed patterns.

However, no trades should be taken until the pattern breaks the cut-out line.

The most common entry point is a breakout of the cutline, with a stop above or below the right shoulder. As for the profit target, it is the difference between the high and low of the Forex pattern supplemented (market bottom) or subtracted (market top) from the breakout price.

Although this system is not perfect, it provides an approach to trading the markets that is based on logical price movements.

Chart Patterns and Forex Forecast - Triangles and Their Types

As the name suggests, this graphic shape has a triangular shape. A triangular pattern consists of two trend lines: a flat and either an upward or downward trend, and the price fluctuates between these two trend lines.

There are three types of triangular Forex patterns that differ in their importance and design, these are: ascending, symmetrical, and descending triangles.

Forex Pattern Symmetrical Triangle

Let's start with a symmetrical triangle. It is often considered to be a continuation of a chart pattern that signals a period of consolidation in a certain trend, followed by a resumption of the previous trend.

It is formed as a result of the confluence of two components: a descending resistance line and an ascending support line. The two trends in this triangle form a slope, the point of convergence of which is called the top. The value of the security will balance these trend lines and move towards the top, and then there will usually be a break in the direction of the preceding trend.

This distinctive characteristic makes this Forex chart pattern special.

In the case of a previous downtrend, the trader's task is to concentrate on a break below the ascending support line. However, if this was preceded by an uptrend, then the trader would need to look for a breakout above the descending resistance line.

This pattern does not always lead to the continuation of the previous trend. Such a breakout in the opposite direction from the previous trend should signal the formation of a new trend.

Features of the Ascending Triangle

An ascending triangle is another forex trading pattern that is actually a bullish pattern. It indicates that the value of the security will move upwards after the trend ends.

This pattern is formed on the chart by two trend lines – the flat trend line, which is the resistance point, and the ascending trend line, which plays the role of price support.

Price moves between these trend lines until it eventually breaks out to the upside. This chart pattern tends to precede an uptrend, making it a repeating pattern. This pattern can also be seen during a downtrend.

The Essence of the Descending Triangle

A descending triangle, as a Forex pattern, is the opposite of an ascending triangle pattern, as it provides a bearish signal to Forex chartists, telling that price will move down until the pattern is completed. This pattern consists of a flat support line and a descending resistance line.

As with the ascending triangle, this chart pattern is considered a continuation chart pattern. This is because it precedes a descending trend line. It can also be found in an uptrend.

Engulfing pattern on the Forex chart

Candlestick charts provide more information than lines, OHLC (Open-High-Low-Close) or any other areas of charts.

Therefore, Forex candlestick chart patterns are a useful tool for measuring price movements on all time frames. Since there are many candlestick patterns, we suggest paying attention specifically to the one that will come in handy for you in Forex trading.

The engulfing pattern is a unique trading opportunity that is easy to spot, and the price movement identifies a powerful and instantaneous change of direction.

In a downtrend, the real body of the upper candlestick will completely absorb the real body of the previous lower candlestick. Conversely, in an uptrend, the real body of the lower candlestick will completely absorb the real body of the next upper candlestick.

This pattern is very well suited for trading – price action identifies a strong reversal when the previous candlestick has already fully recovered. Traders can capitalize on the start of a potential trend by executing a stop order.

What is the bounce of the Ichimoku cloud?

Ichimoku is a Forex pattern technical indicator which overlays price data on a specific chart. Since patterns are not always easy to identify on a real Ichimoku chart, it is better to combine the Ichimoku cloud with price action and then you will see common patterns.

In turn, the Ichimoku cloud consists of two previous support and resistance levels. Thanks to this, it generates dynamic support and resistance zones.

In other words, if the price action is above the cloud, then it is bullish, and the cloud is acting as support. If the price movement is below the cloud, then it is bearish, and the cloud acts as resistance.

A cloud bounce is a common continuing pattern, but the resistance and support of the cloud are more dynamic than the usual horizontal resistance or support lines. This figure shows entrances as well as feet that are not visible to the naked eye.

Forex Market Forecast - Conclusions

Being able to predict Forex is not an easy trick, and it will prevent you from getting rich quick in Forex. This requires constant market analysis and good skills in using different approaches and software. We have discussed the different ways to predict the Forex market, and what benefits a trader can get when using the best Forex forecast indicator.

By looking at the most important types of Forex analysis, we hope to provide you with an understanding of what they mean and their further application. Although technical and fundamental analysis are completely different, you can still use them at the same time.