Trading Support and Resistance

Adam Lemon

Last week was dominated by relative strength in the Euro and relative weakness in the British Pound.

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 September 2020

For the month of September, we forecasted again that the EUR/USD currency pair was likely to see a further rise in price. The September performance to date is negative so far, as shown below:

EUR/USD

Weekly Forecast 13th September 2020 

Last week, we made no weekly forecast.

This week, we again make no forecast, as although there were strong counter-trend price movements in the British Pound against other currencies, we are not confident that the Pound is likely to bounce back.

The Forex market showed an increase in volatility compared to the previous week, with 37% of the important currency pairs and crosses moving by more than 1% in value last week. Volatility is likely to be even higher next week as we will get central bank input concerning three major currencies (the USD, the JPY, and the GBP).

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

Key Support and Resistance Levels

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

AUD/USD

We had expected the level at 0.7300 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 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 more than 3 to 1 based upon the size of the entry candlestick structure.

AUD/USD Weekly Chart H1

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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