Trading Support And Resistance – January 31, 2016

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 2016

This month, we forecasted that the USD will rise against the GBP, CHF and CAD, suggesting long USD/CHF and USD/CAD and short GBP/USD trades. The performance of the forecast overall so far has been very positive:

Monthly Forecast February 2016

This month, we forecast that the USD will strengthen against the GBP, CHF, and EUR.

Weekly Forecast 31st January 2016

Last week, we forecasted that AUD/USD would fall, and USD/CAD rise, as at the close of the week. Unfortunately both of these trades came in at an average loss of 1.14%.

We make no forecasts this week, as there are no pronounced counter-trend movements.

This week has seen strength in the Australian and Canadian Dollars, as well as the Euro, and weakness in the Japanese Yen, Swiss Franc and British Pound. In spite of this mix, as the Euro cannot break up past 1.10 against the USD, it looks as if all the major European currencies are going to weaken, with the USD being the most solid anchor as a long counterpart.

Volatility was lower than the previous week, with just under 50% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be similar this week.