Trading Support and Resistance

Adam Lemon

Get our trading strategies with our monthly & weekly forecast of currency pairs worth watching using support & resistance for the week of September 13, 2021.

This week we will 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 20 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 weekly counter-trend movements by currency pairs made during the previous week.

  • Carry Trade: Buying currencies with high interest rates and selling currencies with low interest rates.

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 2021

For the month of September, we forecasted that if the EUR/USD currency pair ends a week above 1.1908, it will be likely to rise further over the rest of the month. The price has not yet breached 1.1908.

Weekly Forecast 12th September 2021

Last week, we made no weekly forecast, as there were no unusually strong counter-trend movement last week. We again make no weekly forecast this week.

The Forex market again saw a declining level of volatility last week, with only 22% of all the important currency pairs or crosses moving by more than 1% in value. Volatility is likely to be at a similar level over the coming week.

Last week was dominated by relative strength in the US dollar, and relative weakness in the Canadian and Australian dollars.

You can trade our forecasts in a real or demo Forex brokerage account.

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 reversals from two of last week’s key levels would have worked out:

AUD/JPY

We had expected the level at 81.95 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 very large bearish pin bar during last Tuesday’s Asian session (typically a great time to be trading currency pairs involving Asian currencies like this one) marked by the down arrow in the price chart below. This trade has been profitable as the subsequent bearish price movement continued over the rest of the week, achieving a maximum positive reward to risk ratio of more than 2 to 1 based upon the size of the entry candlestick.

AUD/JPY Hourly Chart

USD/CHF

We had expected the level at 0.9227 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 an inside bar during last Wednesday’s New York/London overlap (typically a great time to be trading major Forex currency pairs like this one) marked by the down arrow in the price chart below. This trade has been profitable as the subsequent bearish price movement continued over the rest of the week, achieving a maximum positive reward to risk ratio of more than 3 to 1 based upon the size of the entry candlestick structure.

USD/CHF Hourly 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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