Market Analysis for Week of 14 December 2014

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 December 2014

We forecast that the pair most likely to change in value significantly during the month of December will be USD/JPY, which we expect will rise in value. This pair has been the strongest mover in the market over the previous 3 month and 6 month periods.

Weekly Forecast 14th December 2014

We took no position last week.

There were three exceptionally strong counter-trend moves last week in certain JPY pairs and crosses, so this week we forecast that USD/JPY and CAD/JPY will rise in value over the week.

Average volatility this week was greater than last week. More than half of the major and minor pairs fluctuated in value by more than 1%.

The big picture this week shows a strong counter-trend move against the established long-term strong USD and weak JPY trends. We are also seeing the beginning of some strength in the EUR, and continuing weakness in the AUD.

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 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:

USD/CAD

We had expected the level at 1.15000 might act as resistance, as it had acted previously as both resistance and support. Note how these “flipping” levels can work really well. The H4 chart below shows how there were two opportunities to go short off this level last week. Firstly, there was a small pin candle during the Tokyo session last Tuesday, marked at (1). However this move down ran out of stream fairly quickly, but there was another short bounce later during the week off an inside candle marked at (2). Neither of these trades went very far before being stopped out, exemplifying how it can be advantageous to be very conservative about protecting profits when trading against a strong trend such as the current strongly bullish trend in this pair.

EUR/JPY

We had expected the level at 146.40 might act as support, as it had acted previously as both resistance and support. Note how these “flipping” levels can work really well. The H4 chart below shows how last Wednesday, the price just kisses 146.40 and bounced up quite strongly, printing a large bullish candle that was immediately followed by an inside candle, marked at (1). This broke to the upside on the next candle, whilst the low held, giving a possible long trade entry. It has since come very close to the first obvious resistance at 148.25, so it might be time to consider protecting profits.

That’s all until next week. Our next newsletter will be coming to you on Sunday 21st December.

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

 
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