Trading Support and Resistance - 17 February 2019

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_17022019

Monthly Forecast February 2019

For the month of February, we forecasted that the best trade would be long GBP/USD. The forecast’s performance so far is as follows:

table02_17022019
 

Weekly Forecast17th February 2019 

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

About 26% of the important currency pairs or crosses moved by more than 1% in value over the past week. Volatility has decreased and will probably increase over the coming week.

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

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_17022019

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

EUR/USD

We had expected the level at 1.1256 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 start of the Asian session last Wednesday, marked by the up arrow in the price chart below, forming a clear bullish engulfing candlestick as part of a bullish v-formation. Such candlestick structures are often useful indicators of reversals when their wicks or the wick of the structure reject key levels. This trade was profitable, achieving a maximum positive reward to risk ratio of approximately 2 to 1.

EURUSD_17022019

AUD/USD

We had expected the level at 0.7054 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 during the Asian session last Tuesday, marked by the up arrow in the price chart below, forming a very large bullish outside candlestick which closed bullishly right at its high. This took a long time to push the price up further, but it eventually did. Such candlestick structures are often useful indicators of reversals when their wicks or the wick of the structure rejects key levels. This trade has been profitable, achieving a maximum positive reward to risk ratio so far of more than 2 to 1.

AUDUSD

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.