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:
- 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 March 2018
For the month of March, we forecasted that the best trade would be long GBP/JPY. The forecast’s performance to date is shown below:
Weekly Forecast 24th March 2019
About one third of the important currency pairs or crosses moved by more than 1% in value over the past week. Volatility is likely to decrease 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:
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 1.3019 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 London /New York session overlap last Thursday, turning immediately bullish with an inside candlestick which broke up from a strong V-shaped inflection right away. This trade has been profitable, having achieved a maximum positive reward to risk ratio so far of approximately 2 to 1.
We had expected the level at 0.7164 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 during the Asian session last Thursday, which can be a great time to enter new trades in a currency pair involving at least one Asian currency such as this. The price broke down immediately following the bearish double inside candlestick formation. This trade has been very profitable so far, having achieved a maximum positive reward to risk ratio of more than 5 to 1.
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.