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:

• 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 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 January 2014

We forecasted that the pair most likely to change in value significantly during the month of January was the USD/JPY. This pair had been the strongest mover in the market over the previous 3 month and 6 month periods.

Weekly Forecast 18th January 2015

Last week, we forecasted that EUR/JPY, GBP/JPY and CHF/JPY were all likely to rise in value. We are aware that in Forex “accidents tend to occur along the line of least resistance”, so are happy to note that if you had taken this basket trade, you would be up by +4.15% on an unleveraged trade!

This week was of course dominated by the unprecedented sudden rise in the CHF by almost 17%. The EUR fell in value by a little more than 4%, and the huge CHF movement has caused knock-on effects of instability and volatility. Therefore we make no weekly forecasts, but observe that when there is a sudden strong movement in a currency, it tends to follow through over the coming weeks and months. We therefore expect the CHF to continue to strengthen, but it may not happen this week or even over the next several weeks. Furthermore, we expect a continuing high level of volatility in CHF pairs.

We have also seen continuing strength in the USD, and continuing weakness in the EUR and to a lesser extent the CAD.

The JPY has strengthened significantly this month.

You can trade our forecasts in a real or demo Forex brokerage account.

Previous Monthly Forecasts

Our forecast for November 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:

That’s all until next week. Our next newsletter will be coming to you on Sunday 25th January.

You can trade our forecasts in a real or demo Forex brokerage account.

Adam Lemon
Chief Instructor
www.fxacademy.com