Trading Support and Resistance - 4 November 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:
- Trading the two currencies that are trending the most strongly over the past 3 months.
- Assuming that trends are usually ready to reverse after 12 months.
- Trading against very strong counter-trend movements by currency pairs made during the previous week.
- Buying currencies with high interest rates and selling currencies with low interest rates.
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:
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:
Weekly Forecast 4th November 2018
Last week, we made no weekly forecast.
This week, we forecast that the AUD/JPY currency pair will fall in value, as it had a very strong counter-trend move last week.
Just under half of the important currency pairs or crosses moved by more than 1% in value over the past week. This volatility is increasing, and we expect it to be at a similar level over the coming week.
This week has been dominated by relative strength in the New Zealand, 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:
Let’s see how trading one of these key pairs last week off key support and resistance levels could have worked out:
We had expected the level at 129.22 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 London open and Tokyo close last Friday, marked by the down arrow in the price chart below, forming a bearish engulfing candlestick which broke down right away. This is often a great time to enter trades involving Asian currencies such as the Japanese Yen, 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, although it took a while to take off, achieving a maximum positive reward to risk ratio of a little more than 1 to 1.
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.