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 January 2018
For the month of January, we forecasted that the best trades would be short USD/JPY and long USD/CAD. The performance to date is as follows:
Weekly Forecast 20th January 2019
We made no forecast last week, as there were no exceedingly strong counter-trend moves. We again make no forecast this week.
About 41% of the important currency pairs or crosses moved by more than 1% in value over the past week. Volatility has increased substantially and is likely to remain at a similar level over the coming week.
This week has been dominated by relative strength in the British Pound, and relative weakness in the Japanese Yen.
You can trade our forecasts in a real or demo Forex brokerage account.
Previous Monthly Forecasts
You can view the results of our previous monthly forecasts here.
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 two of these key pairs last week off key support and resistance levels could have worked out:
We had expected the level at 1.2918 might act as resistance, 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 rejected this level just after around the London close last Monday, marked by the down arrow in the price chart below, forming a bearish inside candlestick which broke down right away before taking some time to finally fall decisively. Such candlesticks are often useful indicators of reversals when their wicks or the wick of the structure rejects key levels. This trade was profitable, achieving a maximum positive reward to risk ratio of more than 2 to 1.
We had expected the level at 0.7147 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 rejected this level just after the London open last Thursday, marked by the up arrow in the price chart below, forming a bearish engulfing candlestick which broke up as the London session got underway. Such candlesticks are often useful indicators of reversals when their wicks or the wick of the structure rejects key levels. This trade was profitable, achieving a maximum positive reward to risk ratio of just under 4 to 1 so far.
That’s all for this week. 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.