Trading Support & Resistance - 11 June 2017

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By: DailyForex.com

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 June 2017

This month, we forecasted that the highest-probability trade would be long EUR/USD. So far, the performance has been negative:

Table 02

Weekly Forecast 11th June 2017

Last week, we made no forecast.

This week, we again make no forecast, as there were no large counter-trend movements except in the British Pound, which we think will continue to fall.

This week has been dominated by relative strength in the Australian Dollar, and relative weakness in the British Pound.

Volatility was higher than it was last week, with one third 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.

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:

AUD/JPY

We had expected the level at 81.84 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work well. The H1 chart below shows the how the price initially hit this level and formed a bullish inside candle early in the London session last Tuesday, providing a possible long trade entry marked by the first upwards arrow in the chart below. This would have been stopped out a few hours later, but there was then another chance to enter long at the second upwards arrow following the bullish break of a bullish engulfing candle. This long trade has given a good reward to risk ratio of almost 3 to 1 so far, if the stop had been placed just below the swing low at the entry candlestick.

AUDJPY

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.