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:
* 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 February 2016
This month, we forecasted that the USD will rise against the GBP, CHF and EUR, suggesting long USD/CHF and short EUR/USD trades. The performance of the forecast overall so far has been negative:
Weekly Forecast 21st February 2016
We made no forecast last week.
We make no forecast again this week, as there are no pronounced counter-trend movements.
This week has seen strength in the Japanese Yen, as well as in the Australian and Canadian Dollars, with weakness in the Euro and Swiss Franc. It is hard to say what is most likely to happen next as the market is in a major flux and we may start to see some big trend reversals. Long Japanese Yen certainly continues to look attractive.
Volatility was a little higher than the previous week, with just over half of the major and minor currency pairs changing in value by less than 1%. Volatility is likely to be lower this week as there are fewer high-impact news events scheduled.
You can trade our forecasts in a real or demo Forex brokerage account.
Key Support/Resistance Levels for Popular Pairs
At the FX Academy, 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:
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.