Trading Support and Resistance – 10 June 2018

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 June 2018

For the month of June, we forecasted that the best trade would be long USD/SEK. The performance so far has been negative, as shown below:

Currency Pair Forecast Direction Interest Rate Differential Performance to Date
USD/SEK Long ↑

2.25% (1.75% – -0.50%)

-1.31%

Weekly Forecast 10th June 2018

Last week, we made no forecasts, as there were no strong counter-trend price movements.

This week, we make no forecasts, as there were again no strong counter-trend movements.

This week has been dominated by relative strength in the Euro, and relative weakness in the U.S. Dollar and Japanese Yen, but the weak numbers were small enough to be relatively negligible.

Volatility was extremely low last week, with not one of the major or minor currency pairs changing in value by more than 1%. Volatility is likely to be much higher this week.

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:

Currency Pair Key Support / Resistance Levels
AUD/USD Support: 0.7559, 0.7510, 0.7479, 0.7453

Resistance: 0.7603, 0.7641, 0.7719, 0.7740

EUR/USD Support: 1.1732, 1.1709, 1.1648, 1.1600

Resistance: 1.1792, 1.1875, 1.1897, 1.1937

GBP/USD Support: 1.3338, 1.3300, 1.3261, 1.3221

Resistance: 1.3482, 1.3521, 1.3601, 1.3666

USD/JPY Support: 109.07, 108.05, 107.49, 107.27

Resistance: 109.61, 109.85, 110.40, 110.58

AUD/JPY Support: 82.60, 81.73, 81.35, 80.42

Resistance: 83.34, 84.54, 84.83, 85.44

EUR/JPY Support: 127.32, 126.35, 125.60, 124.71

Resistance: 129.28, 129.90, 131.61, 132.57

USD/CAD Support: 1.2826, 1.2793, 1.2750, 1.2650

Resistance: 1.3047, 1.3141, 1.3190, 1.3254

USD/CHF Support: 0.9827, 0.9679, 0.9500, 0.9384

Resistance: 0.9913, 0.9936, 0.9985, 1.0005

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

AUD/JPY

We had expected the level at 84.54 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 hit and rejected this level right at the start of the Asian session last Thursday, a time of day which is often good for entering trades in Asian currency crosses such as this one. It made a sharp rejection to the pip, printing a bearish engulfing candlestick immediately following the rejection of the level, signaling a short trade entry shown by the downwards arrow. Despite the very large candle naturally giving a large stop loss, this trade has been profit, achieving a maximum positive reward to risk ratio so far greater than 3 to 1.

This article provided by NewsEdge.