Trading Support and Resistance - 19 August 2018

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:

TABLE

Monthly Forecast August 2018

For the month of August, we forecasted that the best trades will be short EUR/USD and short GBP/USD. The performance so far is as follows:

Currency Pair

Forecast Direction

Interest Rate Differential

Performance to Date

EUR/USD

Short ↓

2.00% (2.00% - 0.00%)

+1.01%

GBP/USD

Short ↓

0.75% (0.75% - 0.00%)

+1.93%

Weekly Forecast 19th August 2018 

Last week, we made 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 New Zealand Dollar, and relative weakness in the British Pound. Sentiment is mixed and unclear.

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: 0.7299, 0.7248, 0.7231, 0.7207

Resistance: 0.7322, 0.7348, 0.7382, 0.7479

EUR/USD

Support: 1.1353, 1.1308, 1.1296, 1.1150

Resistance: 1.1444, 1.1496, 1.1580, 1.1630

GBP/USD

Support: 1.2616, 1.2552, 1.2429, 1.2388

Resistance: 1.2818, 1.2842, 1.2920, 1.2975

USD/JPY

Support: 110.00, 109.07, 108.05, 107.49

Resistance: 110.65, 111.14, 111.86, 112.15

AUD/JPY

Support: 80.22, 79.35, 78.89, 76.59

Resistance: 81.28, 81.81, 81.86, 82.60

EUR/JPY

Support: 125.65, 124.71, 123.75, 120.74

Resistance: 128.49, 128.98, 130.05, 130.40

USD/CAD

Support: 1.3053, 1.2996, 1.2826, 1.2793

Resistance: 1.3114, 1.3281, 1.3327, 1.3383

USD/CHF

Support: 0.9904, 0.9885, 0.9827, 0.9679

Resistance: 0.9982, 1.0010, 1.0111, 1.0150

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

GBP/USD

We had expected the level at 1.2818 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 returned to hit and strongly reject this level right at the start of the London session last Tuesday. This is often a great time to enter trades in the GBP/USD currency pair. The price immediately printed a bearish and very large outside candlestick which broke downwards right away, which often signifies a good reversal is taking place. This trade was nicely profitable, achieving a maximum positive reward to risk ratio of more than 1.5 to 1 so far. A better result would have been achieved by using a tighter stop loss, as the entry candlestick was very large.

GBPUSD

AUD/USD

We had expected the level at 0.7207 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 returned to hit and reject the level during the Asian session last Wednesday. This is often a very good “local” time of day to enter trades in currency pairs of Asian time-zone currencies such as the AUD/USD currency pair. The price immediately printed a bullish pin candlestick which broke upwards right away, which often signifies a good reversal is taking place. This trade was very nicely profitable, achieving a maximum positive reward to risk ratio of more than 6 to 1 so far.

AUDUSD

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.