This week we will 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 20 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 weekly counter-trend movements by currency pairs made during the previous week.
Carry Trade: Buying currencies with high interest rates and selling currencies with low interest rates.
Let us 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 2021
For the month of December, we forecast that the GBP/USD and EUR/USD currency pairs will fall in value.
For the month of November, we forecasted that the EUR/USD currency pair would fall in value. The final performance of this forecast is shown below:
Currency Pair | Forecast Direction | Interest Rate Differential | Final Performance |
EUR/USD | Short ↓ | +0.25% (0.25% - 0.00%) | +1.93% |
Weekly Forecast 5th December 2021
In our previous forecast last week, we made no weekly forecast, as there were no unusually strong counter-trend movements during the previous week. This situation was unchanged last week, so we again make no weekly forecast. Fading strong weekly counter-trend price movements is the basis of our weekly trading strategy.
The Forex market saw a decrease in its level of directional volatility last week, with only 26% of all the important currency pairs or crosses moving by more than 1% in value. Directional volatility is likely to remain the same next week but may increase due to the potentially volatile omicron variant situation.
Last week was dominated by relative strength in the Swiss franc and Japanese yen, and relative weakness in the Australian and New Zealand dollars.
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 can be watched on the more popular currency pairs this week.
Currency Pair | Key Support / Resistance Levels |
AUD/USD | Support: 0.6963, 0.6926, 0.6885, 0.6774 Resistance: 0.7086, 0.7120, 0.7205, 0.7271 |
EUR/USD | Support: 1.1251, 1.1229, 1.1195, 1.1155 Resistance: 1.1394, 1.1456, 1.1514, 1.1601 |
GBP/USD | Support: 1.3141, 1.3079, 1.3005, 1.2785 Resistance: 1.3255, 1.3414, 1.3523, 1.3606 |
USD/JPY | Support: 111.55, 111.23, 111.06, 110.82 Resistance: 113.65, 114.16, 114.53, 115.25 |
AUD/JPY | Support: 78.59, 78.14, 77.37, 76.50 Resistance: 79.20, 79.83, 80.56, 80.85 |
EUR/JPY | Support: 127.44, 126.88, 126.65, 126.43 Resistance: 128.34, 128.86, 129.56, 130.03 |
USD/CAD | Support: 1.2710, 1.2672, 1.2611, 1.2571 Resistance: 1.2847, 1.2990, 1.3000, 1.3025 |
USD/CHF | Support: 0.9072, 0.9000, 0.8969, 0.8943 Resistance: 0.9271, 0.9370, 0.9387, 0.9438 |
That is 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.