Trading Support and Resistance - 22 July 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 July 2018

For the month of July, we forecasted that the best trades would be long USD/JPY and long USD/SEK. The performance so far is as follows:

Currency Pair

Forecast Direction

Interest Rate Differential

Performance to Date

USD/SEK

Long ↑

2.50% (2.00% - -0.50%)

-1.15%

USD/JPY

Long ↑

2.10% (2.00% - -0.10%)

-0.68%

Weekly Forecast 22nd July 2018

Last week, we make no forecasts, as there were no strong counter-trend movements.

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

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

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

Previous Monthly Forecasts

You can view the results of our previous monthly forecasts here.

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: 0.7404, 0.7395, 0.7309, 0.7260

Resistance: 0.7453, 0.7479, 0.7510, 0.7580

EUR/USD

Support: 1.1703, 1.1675, 1.1596, 1.1496

Resistance: 1.1759, 1.1875, 1.1897, 1.1937

GBP/USD

Support: 1.3117, 1.3083, 1.3000, 1.2951

Resistance: 1.3145, 1.3350, 1.3482, 1.3521

USD/JPY

Support: 111.41, 111.17, 110.79, 110.55

Resistance: 111.75, 110.79, 110.55, 110.00

AUD/JPY

Support: 82.11, 81.30, 80.42, 80.00

Resistance: 83.00, 83.45, 84.54, 84.83

EUR/JPY

Support: 129.97, 128.55, 127.11, 126.35

Resistance: 131.21, 131.47, 131.76, 132.57

USD/CAD

Support: 1.3100, 1.3047, 1.2826, 1.2793

Resistance: 1.3160, 1.3281, 1.3327, 1.3383

USD/CHF

Support: 0.9907, 0.9885, 0.9827, 0.9679

Resistance: 0.9953, 1.0010, 1.0150, 1.0191

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

USD/JPY

We had expected the level at 113.13 might act as resistance, 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 and rejected this level just around the New York open last Thursday. This is often a really good time of day to enter trades in this currency pair. The price immediately printed a bearish engulfing candlestick which broke downwards right away, which often signifies a good reversal is taking place. This trade has been very profitable, achieving a maximum positive reward to risk ratio so far of more than 5 to 1.

USDJPY

AUD/JPY

We had expected the level at 83.00 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 hit and rejected this level just before the New York open last Wednesday, a time of day which is often good for securing the start of a major price reversal. The price immediately printed a bullish pin candlestick which broke upwards right away. This trade was profitable, achieving a maximum positive reward to risk ratio greater than 4 to 1.

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.