Trading Support and Resistance - 30 December 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:

table0130122018

Monthly Forecast December 2018

For the month of December, we forecasted that the best trades would be short EUR/USD, short GBP/USD, and long USD/JPY.

The performance to date is as follows:

table0212302018

For the month of January, we forecast that the best trades will be short USD/JPY and long USD/CAD. 

Weekly Forecast 30th December 2018

We made no forecast last week, as there were no exceedingly strong counter-trend moves. We again make no forecast this week.

Only 11% of the important currency pairs or crosses moved by more than 1% in value over the past week. Volatility has decreased substantially, but it is quite likely to rise at the end of this week.

This week has been dominated by relative strength in the Swiss Franc, and relative weakness in the Australian 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:

table1230122018
USD/CHF

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 0.9961 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 just before the New York close 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 of day to enter trades involving North American currencies such as the U.S. 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 profitable, achieving a maximum positive reward to risk ratio of more than 12 to 1 so far.

USDCHF

That’s all for this week. 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.