Trading Support and Resistance

Adam Lemon

Get our trading strategies with our monthly & weekly forecasts of currency pairs worth watching using support & resistance for the week of December 21, 2020.

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 18 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 chart

Monthly Forecast December 2020

For the month of December, we forecasted that the EUR/USD currency pair would be likely to rise in value. Its performance so far this month is as follows:

Monthly Forecast December 2020 chart
Weekly Forecast 20th December 2020

Last week, we forecasted that the GBP/USD currency pair was likely to rise in value. This was a good call, as its price rose by 2.30% over the week.

This week, we make no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market last week.

The Forex market showed a similar level of volatility compared to the previous week, with approximately 40% of the important currency pairs and crosses moving by more than 1% in value last week. Volatility is likely to decline over the coming week due to the upcoming Christmas holiday.

Last week was dominated by relative strength in the British pound, and relative weakness in the U.S. 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 & Resistance Levels chart

Let us see how trading reversals from two of last week’s key levels would have worked out:

USD/JPY

We had expected the level at 104.15 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 with a small bearish near-doji pin candlestick during last Monday’s Tokyo session, marked by the down arrow in the price chart below, which is typically a good time to be trading Japanese yen currency pairs or crosses such as this one. This trade was very profitable, achieving a maximum positive reward to risk ratio of more than 12 to 1 so far based upon the size of the entry candlestick.

USD/JPY chart

AUD/JPY

We had expected the level at 78.13 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 with a bullish engulfing candlestick structure late during last Tuesday’s Tokyo session, which is typically a good time to be trading major Asian currency crosses such as this one. This trade has been nicely profitable, achieving a maximum positive reward to risk ratio of about 3 to 1 based upon the size of the entry candlestick structure.

AUD/JPY chart

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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