Subject: Forex Overview (February 2nd) - FX Academy
 Dear Friend, Each week we like to send out our thoughts on the Forex market, not only to highlight potential trade set-ups for you to watch out for, but also to enhance your learning with some real-time market analysis. 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 11 years of Forex prices, which show that the following methodologies have all produced profitable results:
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 February 2014 We forecast that the pair most likely to change in value significantly during the month of February will be USD/CAD, which should rise. This pair has been the strongest mover over the previous 6 months and, with the exception of the CHF, over the previous 3 months as well. The strong move in CHF looks abnormal and suspicious. Weekly Forecast 1st February 2015 Last week we forecasted that the CHF/JPY and NZD/JPY pairs would both rise, although we recommending treating the trade as a split basket, halving the results, which were as follows:
This week was dominated by the continuing long-term strength in the USD and weakness in the CAD. The NZD and AUD also weakened further and are looking technically and fundamentally bearish. The EUR strengthened slightly. The CHF has been weakening quite dramatically, reversing its sudden strength when it was uncapped. The GBP and JPY have also strengthened a little and this is not a sudden development, it has been happening for a while. It was a very volatile week all round, with more than half of the major and minor currency pairs fluctuating in value by more than 1%, and most of these changed in value by more than 2%. There were more very strong counter-trend moves this week, but they were all in CHF pairs, and the CHF is behaving oddly so we do not make any forecasts regarding the CHF. You can trade our forecasts in a real or demo Forex brokerage account. Previous Monthly Forecasts Our Forecast for January 2015 was long USD/JPY. The forecast did not perform positively, as shown below:
Our forecast for December 2014 was long USD/JPY. The forecast performed positively, as shown below:
Our forecast for November 2014 was long USD/JPY. The forecast performed extremely positively, as shown below:
Our forecast for October 2014 was short EUR/USD and long USD/JPY. The forecast performed very positively, as shown below:
Earlier monthly forecasts may be seen here. Key Support/Resistance Levels for Popular Pairs At the FX Academy, 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:
Let’s see how trading some of these key pairs last week off key support and resistance levels could have worked out: AUD/USD We had expected the level at 0.8000 might act as resistance, as it had acted previously as both support and resistance and is also a key psychological round number. Note how these “flipping” levels can work really well. The H4 chart below shows how there was an opportunity to go short off this level last week. The price rose to bounce off 0.8000 during Wednesday’s Asian session, before forming a candle that was a pin candle. The price then fell sharply all the way down to our anticipated support at 0.7800 and beyond. Exiting there would have given a reward of 179 pips for a risk of about 45 pips.
EUR/JPY We had expected the level at 134.20 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H4 chart below shows how there was an opportunity to go short off this level last week. The price rose to bounce off 0.8000 during Wednesday’s Asian session, before forming a candle that was a bearish engulfing candle, followed immediately by a bearish inside candle. The price then fell to local support at 132.50 before rising again to retest the entry zone. The price then fell again and would be in profit. If the price does not break down past 132.50 quite soon after the market opens for the new week, it would be wise to move the stop loss to break even. That’s all until next week. Our next newsletter will be coming to you on Sunday 8th February. You can trade our forecasts in a real or demo Forex brokerage account. Adam Lemon
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