Trading Support and Resistance - 18 September 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:

Table 01

Monthly Forecast September 2016

This month we forecasted that the highest-probability trade will be long NZD/USD. The performance so far is slightly positive, as follows:Table 02


Weekly Forecast 18th September 2016

Last week, we made no forecast.

This week, we make no forecast, as there were no strong counter-trend moves.

This week has been dominated again by strength in the Japanese Yen, and weakness in the British Pound.

Volatility was slightly higher than it was during the previous week, with approximately 40% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be much greater over this coming week, which will be dominated by central bank actions from the U.S. Federal Reserve, the Bank of Japan, and the Reserve Banks of Australia and New Zealand.

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


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:Table 12

Let’s see how trading one of these key pairs last week off key support and resistance levels could have worked out:


We had expected the level at 113.95 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows the how the price initially hit this level around the Tokyo open last Tuesday, a time which can be crucial for currency crosses or pairs involving the Japanese Yen such as the EUR/JPY currency pair. The price reversed immediately with a bullish doji candle marked by the green up arrow in the chart. This was the low price of the week. This long trade gave a maximum reward to risk ratio of more than 9 to 1 so far, if the stop had been placed just below the swing low. Strangely, exactly the same thing happened during the previous week, same time of day, candlestick type etc.


You can trade our forecasts in a real or demo Forex brokerage account to test the strategies and strengthen your self-confidence before investing real funds.

Adam is a Forex trader who has worked within financial markets for over 12 years, including 6 years with Merrill Lynch. He is certified in Fund Management and Investment Management by the U.K. Chartered Institute for Securities & Investment. Learn more from Adam in his free lessons at FX Academy.