Trading Support and Resistance

Adam Lemon

The Forex market is showing a much lower level of price activity compared to the previous week, with only 19% of the important currency pairs and crosses moving by more than 1% in value over the past week.

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:

Currency Price Changes and Interest Rates

Monthly Forecast April 2020

For the month of April, we forecasted that the best trade will be short AUD/USD. The performance to date has been negative, as shown below:

April Performance to Date

Weekly Forecast 19th April 2020

Last week, we forecasted that the GBP/AUD currency cross was likely to rise in value. It did rise last week, but only by 0.14%.

We make no forecast this week, as there were no very strong counter-trend price movements.

The Forex market is showing a much lower level of price activity compared to the previous week, with only 19% of the important currency pairs and crosses moving by more than 1% in value over the past week. Volatility is likely to remain at a similar level over the coming week.

Last week was dominated by relative strength in the Japanese Yen, 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.

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 can be watched on the more popular currency pairs this week.

Key Support and Resistance Levels

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

AUD/USD

We had expected the level at 0.6268 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 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 AUD/USD) turning bullish right away with a pin candlestick marked by the up arrow signaling the timing of the turn. This trade was profitable, achieving a maximum positive reward to risk ratio of approximately 4 to 1 so far based upon the size of the entry candlestick.

AUD/USD Hourly Chart

GBP/USD

We had expected the level at 1.2443 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 how the price rejected this level towards the start of last Wednesday’s New York session (a great time to trade USD-based currency pairs such as GBP/USD) turning bullish right away with an inside candlestick marked by the up arrow signaling the timing of the turn. This trade was profitable, achieving a maximum positive reward to risk ratio of approximately 2 to 1 based upon the size of the entry candlestick.

GBP/USD Hourly Chart

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.

About the Author
Adam Lemon

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.
Learn more from Adam in his free lessons at FX Academy

Currency Pairs:
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