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:
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.
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 January 2016
This month we forecasted that the highest-probability trade would be short GBP/USD. The trade has performed positively so far:
Weekly Forecast 8th January 2017
Last week, we made no forecast, as there were no strong counter-trend movements.
This week, we again make no forecast.
This week has again been dominated by relative strength in the Canadian Dollar, and relative weakness in the U.S. Dollar. Volatility was very low so these numbers should not be taken seriously.
Volatility was at a similarly low level to last week, with not one of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be higher over this coming week.
You can trade our forecasts in a real or demo Forex brokerage account.
Key Support/Resistance Levels for Popular Pairs
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 1.0350 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work well. The H1 chart below shows the how the price hit this level during the overlap of the London and New York sessions last Tuesday. This can be a very important time in the Forex market, especially for this pair. Entry was signaled by the bullish pin candle which formed immediately after the price was hit, marked by the up arrow within the chart below. This long trade gave a maximum reward to risk ratio of more than 4 to 1, if the stop had been placed just below the swing low at the entry candlestick.
You can trade our forecasts in a real or demo Forex brokerage account to test the strategies and strengthen your self-confidence before investing real funds.