Last week, I made no weekly forecast. This week, I again make no weekly forecast, as there were no unusually strong truly counter-trend price movements in the market last week.

This week I will begin with my monthly and weekly Forex forecast of the currency pairs worth watching. The first part of my forecast is based upon my 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 6 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 January 2023

For the month of January, I forecasted that the EUR/USD currency pair would rise in value and that the USD/JPY currency pair would fall in value.

The forecast performance is as follows:

Weekly Forecast 15^th January 2023

Last week, I made no weekly forecast. This week, I again make no weekly forecast, as there were no unusually strong truly counter-trend price movements in the market last week.

Directional volatility in the Forex market is likely to remain the same over the coming week.

Last week was dominated by relative strength in the Japanese Yen, and relative weakness in the US Dollar and the Swiss Franc.
 

Key Support/Resistance Levels for Popular Pairs

I 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 monitored on the more popular currency pairs this week.

(Click on image to enlarge)

Let us see how trading one of these key pairs last week off key support and resistance levels could have worked out:
 

USD/JPY

I had expected the level at ¥132.90 might act as support in the USD/JPY currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how although the level was not quite reached, the price rejected the weekly high just 3 pips below that level right at the start of last Wednesday’s New York session (which can often be a great time to enter Forex trades involving the major currency pairs like this one) with a small inside candlestick, marked by the down arrow signaling the timing of this bearish rejection. This trade would have been extremely profitable, achieving a maximum positive reward to risk ratio of more than 12 to 1 so far based on the size of the entry candlestick structure.

(Click on image to enlarge)

More By This Author:

Weekly Forex Forecast - Sunday, Jan. 15
EUR/USD: Weekly Forecast January 15 - 21
USD/JPY Forex Signal: Bearish Trend To Persist Ahead Of US CPI Data