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 November 2019
For the month of November, we forecasted that the best trade would be long GBP/USD following a daily close higher than 1.3081. There has not been a daily close above that level yet.
Weekly Forecast 24th November 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 much less active, with none of the important currency pairs and crosses moving by more than 1% in value over the past week. Volatility is likely to be at a similarly low level over the next week. There are no strong trends in the Forex market as present.
Last week was dominated by relative strength in the U.S. Dollar, and relative weakness in the Swiss Franc, but the respective values were very low and so unlikely to be significant.
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 1.1093 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work very well. The H1 chart below shows how at last Thursday’s New York open, the price bounced strongly off that level, forming a large bearish outside candlestick marked by the down arrow in the price chart below, which immediately broke to the downside. Note how the beginning of a major session such as the New York session can often be a great time to enter trades in major currency pairs which involved the U.S. Dollar. This trade has given an acceptable maximum reward to risk ratio of more than 2 to 1 so far.
We had expected the level at 120.64 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work very well. The H1 chart below shows how just before last Tuesday’s New York open, the price failed to break above that level very clearly, forming first a bearish pin candlestick followed by a bearish inside candlestick which was also more or less a pin candlestick, marked by the down arrow in the price chart below, which immediately broke to the downside. Note how the beginning of a major session such as the New York session can often be a great time to enter trades in major currency crosses. This trade has given a great maximum reward to risk ratio of more than 5 to 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.