Trading Support and Resistance

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:

TABLE01

Monthly Forecast November 2018

For the month of November, we forecasted that the best trade would be short EUR/USD. The performance to date is as follows:

TABLE02

Weekly Forecast 18th November 2018 

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

This week, we again make no weekly forecast.

Less than 44% of the important currency pairs or crosses moved by more than 1% in value over the past week. This volatility is increasing, but we expect it is likely to decrease again the coming week.

This week has been dominated by relative strength in the New Zealand Dollar, 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:

TABLE12

AUD/USD

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

We had expected the level at 0.7165 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 rejected this level right at the Tokyo open last Tuesday, marked by the up arrow in the price chart below, forming a bullish pin candlestick which broke up right away. This is often a great time of day 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 been profitable so far, achieving a maximum positive reward to risk ratio of slightly less than 10 to 1.

AUDUSD

USD/CHF

We had expected the level at 1.0110 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 early in the London session last Tuesday, marked by the down arrow in the price chart below, forming a bearish pin candlestick which broke down right away. This is often a great time of day to enter trades involving European currencies such as the Swiss Franc, and such candlesticks are often useful indicators of reversals when their wicks or the wick of the structure rejects key levels. This trade was been profitable so far, achieving a maximum positive reward to risk ratio so far of a little more than 5 to 1.

USDCHF

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.