Trading Support and Resistance - 4 March 2018

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 16 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 Forecasts February / March 2018

For the month of February, we forecasted that the best trades would be long EUR/USD and GBP/USD. The final performance was as follows:Table 02

For the month of March, we forecast that the best trades will be short USD/JPY and long EUR/USD.

Weekly Forecast 4th March 2018

Last week, we made no forecast, as there were no strong counter-trend moves.

This week, we again make no forecast, as there have been no strong counter-trend moves.

This week has been dominated by relative strength in the Japanese Yen, and relative weakness in the Canadian Dollar.

Volatility was much higher than it was last week, with more than 51% of the major or minor currency pairs changing in value by more than 1%. Volatility is likely to be even higher next 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:

USD/CHF

We had expected the level at 0.9327 might act as support, and the level at 0.9487 might act as resistance, as they had both acted previously as both support and resistance. Note how these “flipping” levels can work well. The H1 chart below shows the how the price hit 0.9327 at the start of the London session last Monday, which is typically a good time of day to enter trades in pairs involving European currencies such as this one. A possible entry was signaled initially by the immediately subsequent large engulfing candlestick, marked by the up arrow within the chart below. This long trade has so far given a maximum reward to risk ratio of a little more than 7 to 1. At the very top of its range, a short trade entry signal was given at the resistance level identified at 0.9487. The price rejected this level around the time of the London close last Thursday. A possible entry was signaled initially by the immediately subsequent large engulfing candlestick, marked by the down arrow within the chart below. This short trade has so far given a maximum reward to risk ratio of a more than 3 to 1.

USDCHF

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.