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Today I will begin with my monthly and weekly forecasts of the currency pairs worth watching. The first part of my forecast is based upon 20 years' worth of research of Forex prices, which shows that the following methodologies have all produced profitable results:

• Trading the two currencies that are trending the most strongly over the past six 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'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 for December 2022

This month I forecasted that the EUR/USD currency pair would rise in value, although I only made this forecast one week ago. Over the past week, this currency pair rose in value by 0.49%.

Weekly Forecast for Dec. 19, 2022

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

Directional volatility in the Forex market is likely to decrease somewhat over the coming week as there are fewer high-impact events scheduled than last week. Last week was dominated by relative strength in the euro, as well as relative weakness in the Australian dollar.

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.

Let's see how trading two of these key pairs last week off key support and resistance levels could have worked out.

AUD/JPY

I had expected the level at JPY93.16 might act as resistance in the AUD/JPY currency cross 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 the price rejected this level right at the end of last Tuesday’s Tokyo session (which can often be a great time to enter Forex trades in the Japanese yen) with a bearish inverse hammer/shooting star candlestick, marked by the downward arrow which signals the timing of this bearish rejection.

This trade has been nicely profitable, achieving a maximum, positive reward-to-risk ratio of more than 6 to 1 so far based upon the size of the entry candlestick.

GBP/USD

I had expected the level at $1.2437 might act as resistance in the GBP/USD currency pair last week, as it had similarly acted previously as both support and resistance. The H1 price chart below shows how the price decisively rejected this level right at the end of last Wednesday’s New York session (which can also be a great time to enter Forex trades in the US dollar) with a bearish inside candlestick, marked by the downward arrow.

This trade has also been nicely profitable, achieving a maximum, positive reward-to-risk ratio of more than 9 to 1 so far based upon the size of the entry candlestick.

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