Trading Support and Resistance - 14 October 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:

TABLE1

Monthly Forecast October 2018

For the month of October, we forecasted that the best trade will be long USD/JPY. The performance to date is as follows:

Currency Pair

Forecast Direction

Interest Rate Differential

Performance to Date

USD/JPY

Long ↑

2.35% (2.25% - -0.10%)

-1.29%

Weekly Forecast 14th October 2018 

Last week, we made no weekly forecast.

We make no weekly forecast this week, as there were no strong counter-trend price movements last week.

Fewer than 15% of the important currency pairs or crosses moved by more than 1% in value over the past week. This volatility is low, but we expect it to be at least a little higher over the coming week.

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

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: 0.7104, 0.6992, 0.6940, 0.6827

Resistance: 0.7203, 0.7238, 0.7321, 0.7382

EUR/USD

Support: 1.1541, 1.1515, 1.1480, 1.1444

Resistance: 1.1633, 1.1659, 1.1697, 1.1732

GBP/USD

Support: 1.3128, 1.3030, 1.3006, 1.2894

Resistance: 1.3192, 1.3350, 1.3482, 1.3521

USD/JPY

Support: 111.66, 111.43, 111.31, 110.89

Resistance: 112.83, 113.56, 114.18, 114.74

AUD/JPY

Support: 79.45, 79.00, 78.50, 78.19

Resistance: 80.79, 82.60, 82.81, 83.45

EUR/JPY

Support: 129.29, 128.97, 128.76, 127.92

Resistance: 130.60, 134.12, 136.89, 137.56

USD/CAD

Support: 1.3003, 1.2952, 1.2884, 1.2858

Resistance: 1.3089, 1.3118, 1.3281, 1.3327

USD/CHF

Support: 0.9823, 0.9744, 0.9701, 0.9637

Resistance: 0.9982, 1.0010, 1.0111, 1.0150

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

AUD/USD

We had expected the level at 0.7129 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 rejected this level close to the end of the Asian session last  London open last Wednesday, marked by the down arrow in the price chart below, forming a bearish inside candlestick which broke down right away. This is often a great time to enter trades involving Asian currencies such as the Australian Dollar, and such candlesticks are often useful indicators of reversals when their wicks or the wick of the structure rejects key levels. This trade was very profitable, achieving a maximum positive reward to risk ratio so far of a little more than 4 to 1.

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 Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.