Trading Support and Resistance

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:

• 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 counter-trend movements by currency pairs made during the previous week.
• Buying currencies with high interest rates and selling currencies with low interest rates.

Let’s take a 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:

Monthly Forecast May 2019

For the month of May, we again forecasted that the best trade will be short EUR/USD. The forecast’s performance to date is shown below:

Last week, we made no weekly forecast. This week, we again make no forecast, as there were no large counter-trend price movements over the past week.

Weekly Forecast 19^th May 2019

Slightly more than 40% of the important currency pairs and crosses moved by more than 1% in value over the past week. Volatility is likely to be lower over the coming week.

Last week was dominated by relative strength in the Swiss Franc, 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 should be watched on the more popular currency pairs this week, which might result in either reversals or breakouts:

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

GBP/USD

We had expected the level at 1.3041 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 the how the price rejected this level near the start of last Monday’s New York session (a great time to trade European / North American currency pairs such as GBP/USD) turning bearish right away with a pin candlestick marked by the down arrow signaling the timing of the turn. This trade has been extremely profitable so far, achieving a maximum positive reward to risk ratio of more than 15 to 1 so far based upon the size of the entry candlestick.

USD/JPY

We had expected the level at 109.07 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 the how the price rejected this level near the start of last Monday’s New York session (a great time to trade major currency pairs such as USD/JPY) turning bullish right away with a pin candlestick marked by the up arrow signaling the timing of the turn. This trade has been profitable so far, achieving a maximum positive reward to risk ratio of more than 6 to 1 so far based upon the size of the entry candlestick.

That’s 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.