Trading Support and Resistance

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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 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:

Global Currencies

Monthly Forecast July 2019

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

For the month of June, we forecasted that the best trade would be short USD/JPY. The forecast’s final performance is shown below:

USDJPY Forecast

Weekly Forecast 30th June 2019

Last week, we made no weekly forecast. This week, we forecast that the NZD/JPY currency cross will decline in value.

41% of the important currency pairs and crosses moved by more than 1% in value over the past week. Volatility is likely to be at a similar over the coming week.

Last week was 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:

Currency Pairs

USD/JPY

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 108.16 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 how the price rejected this level towards the end of last Thursday’s Asian session (a great time to trade partly Asian currency pairs such as USD/JPY) turning bearish right away with a pin candlestick marked by the down arrow signaling the timing of the turn. This trade was profitable, achieving a maximum positive reward to risk ratio of approximately 3 to 1 so far based upon the size of the entry candlestick.

USDJPY

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.