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 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 2020

For the month of December, we forecast that the best trade would be long USD/JPY. The final performance was:

For the month of January, we forecasted that the best trades would be long EUR/USD and long NZD/USD. The performances to date are as follows:

Weekly Forecast January 5 

We made no weekly forecast last week, and we do the same this week, as there were no strong counter-trend movements last week.

The Forex market has shown very slightly increased activity, with 22% of the important currency pairs and crosses moving by more than 1% in value over the past week. Volatility is likely to be higher over the coming week.

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

Previous Monthly Forecasts

You can view the results of our previous monthly forecasts here.

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: