Trading Support and Resistance

Adam Lemon

The Forex market showed an increase in volatility compared to the previous 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 us 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 August 2020

For the month of August, we forecasted that the EUR/USD currency pair was likely to see a rise in price. The performance so far is as follows:

EUR/USD

Weekly Forecast 16th August 2020 

Last week, we made no weekly forecast.

This week, we again make no forecast, as there were again no strong counter-trend price movements.

The Forex market showed an increase in volatility compared to the previous week, with 26% of the important currency pairs and crosses moving by more than 1% in value last week. Volatility is likely to be lower over the coming week, however, due to a near-total absence of high impact scheduled economic data releases.

Last week was dominated by relative strength in the Canadian 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 can be watched on the more popular currency pairs this week.

Key Support and Resistance Levels

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

USD/CHF

We had expected the level at 0.9112 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 right at the start of last Tuesday’s New York session, typically a great time to be trading currency pairs involving the U.S. Dollar, turning decisively bullish when a  strongly bullish pin candlestick broke up right away at the up arrow shown in the price chart below. This trade was nicely profitable, achieving a maximum positive reward to risk ratio of approximately 4 to 1 based upon the size of the entry candlestick.

USD/CHF Hourly Chart 4th - 14th August

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USD/CAD

We had expected the level at 1.3201 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 near the start of last Thursday’s New York session, typically a great time to be trading North American currencies pairs such as the U.S. and Canadian Dollars, finally turning decisively bullish when the double inside candlesticks broke upwards at the up arrow shown in the price chart below. This trade has been profitable so far, achieving a maximum positive reward to risk ratio in floating profit a little greater than 1 to 1 based upon the size of the entry candlestick structure.

USD/CAD Hourly Chart 6th - 14th August

That is 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

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

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