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 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 October 2019
For the month of October, we forecasted that the best trades would be long GBP/USD and long GBP/JPY. The performances to date are as follows:
Weekly Forecast 27th October 2019
Last week, we made no weekly forecast as there were no very strong countertrend movements. This week we again make no forecast.
The Forex market has become less active, with only 19% of the important currency pairs and crosses moving by more than 1% in value over the past week. However, volatility is likely to rise sharply next week.
Last week was dominated by relative strength in the Canadian Dollar, and relative weakness in the British Pound.
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 one of these key pairs last week off key support and resistance levels could have worked out:
We had expected the level at 74.77 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work really well. The H1 chart below shows how during last Tuesday’s Asian session, the price bounced strongly off that level, forming a bearish engulfing candle marked by the down arrow in the price chart below, which immediately broke down. This trade has given a maximum reward to risk ratio of nearly more than 3:1 so far.
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.