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 November 1, 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 November 2021

For the month of November, we forecast that the EUR/USD currency pair will fall in value.

For the month of October, we forecasted that the EUR/USD currency pair would fall in value. The result of this forecast was positive, as shown below:

Currency Pair

Forecast Direction

Interest Rate Differential

Final Performance

EUR/USD

Short ↓

+0.25% (0.25% - 0.00%)

+0.12%

Weekly Forecast 31st October 2021

Last week, we made no weekly forecast, as there were no unusually strong counter-trend movements last week. We again make no weekly forecast this week, as there were again no strong moves to fade, which is the basis of our weekly trading strategy.

The Forex market saw a very small increase in its level of volatility last week, with only 11% of all the important currency pairs or crosses moving by more than 1% in value. Directional volatility is likely to increase next week as there are three major central banks giving their monthly policy releases: the US Federal Reserve, the Bank of England, and the Reserve Bank of Australia. There will also be a release of non-farm payrolls data.

Last week was dominated by relative strength in the Australian dollar, and relative weakness in the euro.

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.

Currency Pair

Key Support / Resistance Levels

AUD/USD

Support: 0.7478, 0.7437, 0.7408, 0.7366

Resistance: 0.7527, 0.7548, 0.7569, 0.7636

EUR/USD

Support: 1.1536, 1.1517, 1.1467, 1.1394

Resistance: 1.1568, 1.1574, 1.1624, 1.1671

GBP/USD

Support: 1.3654, 1.3574, 1.3527, 1.3502

Resistance: 1.3769, 1.3852, 1.3898, 1.3950

USD/JPY

Support: 113.88, 113.03, 111.55, 111.23

Resistance: 114.10, 114.46, 115.45, 116.29

AUD/JPY

Support: 84.96, 84.61, 84.14, 83.79

Resistance: 87.46, 88.43, 89.49, 89.69

EUR/JPY

Support: 131.48, 130.74, 130.48, 130.03

Resistance: 132.35, 132.93, 133.63, 134.16

USD/CAD

Support: 1.2372, 1.2250, 1.2219, 1.2131

Resistance: 1.2402, 1.2499, 1.2563, 1.2605

USD/CHF

Support: 0.9150, 0.9072, 0.9000, 0.8969

Resistance: 0.9176, 0.9248, 0.9270, 0.9331

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

EUR/USD

We had expected the level at 1.1668 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 action rejected this level with a bearish inside bar right at the end of last Thursday’s New York / overlap session (typically one of the best times to trade major currency pairs like this one) marked by the down arrow in the price chart below. This trade has been very profitable, achieving a maximum positive risk reward ratio greater than 7 to 1 based upon the size of the entry candlestick structure.

EUR/USD 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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