Trading Support and Resistance - 11 March 2018

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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:

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:

Currencies

Monthly Forecast March 2018

For the month of March, we forecasted that the best trades would be short USD/JPY and long EUR/USD. The performance to date is as follows:

Currency Pair

Forecast Direction

Interest Rate Differential

Performance to Date

EUR/USD

Long ↑

-1.50% (0.00% - 1.50%)

-0.10%

USD/JPY

Short ↓

1.60% (1.50% - -0.10%)

-1.04%

 

Weekly Forecast 11th March 2018

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

This week, we forecast that the AUD/JPY and CAD/CHF currency crosses will both fall in value, as they have just experienced very strong counter-trend movements.

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

Volatility was lower than it was last week, with approximately 41% of the major or minor currency pairs changing in value by more than 1%. Volatility is likely to be lower still 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:

Currency Pair

Key Support / Resistance Levels

AUD/USD

Support: 0.7774, 0.7696, 0.7640, 0.7629

Resistance: 0.7869, 0.7935, 0.7995, 0.8043

EUR/USD

Support: 1.2284, 1.2252, 1.2005, 1.1885

Resistance: 1.2369, 1.2435, 1.2459, 1.2500

GBP/USD

Support: 1.3824, 1.3759, 1.3657, 1.3559

Resistance: 1.3940, 1.4168, 1.4330, 1.4435

USD/JPY

Support: 106.44, 105.86, 103.34, 100.03

Resistance: 108.05, 109.76, 110.52, 111.20

AUD/JPY

Support: 83.26, 82.93, 82.05, 81.50

Resistance: 83.80, 84.85, 86.00, 87.46

EUR/JPY

Support: 130.61, 130.52, 129.12, 128.40

Resistance: 132.11, 134.16, 134.88, 136.00

USD/CAD

Support: 1.2785, 1.2732, 1.2669, 1.2605

Resistance: 1.2890, 1.2909, 1.3049, 1.3082

USD/CHF

Support: 0.9488, 0.9423, 0.9327, 0.9318

Resistance: 0.9574, 0.9665, 0.9732, 0.9816

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 levels at 81.50 and 83.26 might act as support and 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 the support level at 81.50 and bounced bullishly right away at the start of the London session last Monday, which is typically an effective time of day to enter Forex trades. A possible entry was signaled initially by the immediately subsequent large engulfing candlestick, marked by the up arrow within the chart below. The next day, just after the start of the New York session, the trade was well in profit, and gave a short entry signal by bouncing bearishly off the key resistance level identified at 83.26, with another bearish engulfing candlestick, marked by a down arrow. This short trade gave a maximum reward to risk ratio of a little more than 2 to 1. It was profitable to profit in both directions on this currency cross this week.

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.