Trading Support and Resistance - 1 September 2019

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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:

  • 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 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

Monthly Forecast September 2019

For the month of September, we forecast that the best trades will be short NZD/JPY and short EUR/JPY.

For the month of August, we forecasted that the best trades would be short GBP/JPY and short AUD/JPY. The forecast was profitable, with the final performance shown below:

table02

Weekly Forecast 1st September 2019

Last week, we made no weekly forecast. We make no forecast again this week, as our weekly forecasts are based upon fading strong counter-trend movements, and there were no such movements over the past week.

The Forex market has remained relatively quiet, with only one third of the important currency pairs and crosses moving by more than 1% in value over the past week. Volatility is likely to be at least a little higher over the coming week.

Last week was dominated by relative strength in the U.S. Dollar, and relative weakness in the New Zealand 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.

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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

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

EUR/USD

We had expected the level at 1.1162 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 start of last Monday’s Asian session, turning bearish right away with an engulfing candlestick marked by the down arrow signaling the timing of the turn. This trade has been very profitable, achieving a maximum positive reward to risk ratio of approximately 6 to 1 so far based upon the size of the entry candlestick structure, due to the fast, strong directional movement.

eurusd

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 Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.