Trading Support and Resistance

(MENAFN- Daily Forex) This week we'll begin with our monthly and weekly forecasts of thecurrency pairsworth 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 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:

For the month of September, we forecasted that the best trades would be short NZD/JPY and short EUR/JPY. The performance to date is shown below:

Last week, we made no weekly forecast as there were no strong counter trend moves. The same situation persists this week, so we again make no forecast.

The Forex market has become less active, with only one third of the important currency pairs and crosses moving 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 Japanese Yen, and relative weakness in the Australian Dollar.

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

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You can view the results of our previous monthly forecastshere .

We teach that trades should be entered and exited at or very close to key support and resistance levels. There are certainkey support and resistance levelsthat should be watched on the more popular currency pairs this week, which might result in either reversals or breakouts:

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

We had expected the level at 1.2393 might act as support, as it had acted previously as both support and resistance. Note howthese 'flipping levels can work well . The H1 chart below shows how the price rejected this level right at the start of last Tuesday's London session (a great time of day to trade the British Pound), turning bullish following a bullishinside candlestickanddojicombination marked by the up arrow signaling the timing of the turn. This trade has been very profitable, achieving a maximum positivereward to risk ratioof about 13 to 1 so far based upon the size of the entry candlestick.

That's all for this week. You can trade our forecasts ina real or demo Forex brokerage accountto test the strategies and strengthen your self-confidence before investing real funds.

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