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 December 2017
For the month of December, we forecasted that the best trades would be long EUR/USD, long GBP/USD, and long USD/JPY. The performance so far is as follows:
Weekly Forecast 11th December 2017
Last week, we made no forecast, as there were no strong counter-trend movements.
This week, we again make no forecast, as there were again no strong counter-trend movements.
This week has been dominated by relative strength in the U.S. Dollar, and relative weakness in the Canadian Dollar.
Volatility was slightly lower, with 22% of the major or 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:
USD/CAD
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 1.2641 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 this level, when first hit, produced an attractive bullish pin candlestick coming just after a smaller pin candle and inside candle. The formation was printed at about the same time as New York opened, which can be a perfect time to enter a trade in this currency pair. This long trade would have produced an attractive maximum reward to risk ratio so far of about 7 to 1 if profit had been taken optimally.
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.