Trading Support And Resistance - Oct. 2

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 October 2017

For the month of October, we forecast that the best trade will be long GBP/USD.

Weekly Forecast October 1, 2017

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

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

This week has been dominated by relative strength in the Swiss Franc, and relative weakness in the Australian Dollar. However, these movements do not look very significant.

Volatility was about the same as last week, with approximately 37% of the major and minor currency pairs changing in value by more than 1%. Volatility is likely to be higher over this coming week.

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 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:

GBP/USD

We had expected the level at 1.3344 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 how after holding more or less to the exact pip, the price bounced bullishly off this level and made a bullish inside candlestick which broke bullishly straight away (marked by the upwards arrow in the chart), early during the London session, which is typically a good time to enter a trade in a currency pair involving the British Pound. The maximum reward to risk ratio reached has so far been just about 2 to 1, although the stop loss has not yet been reached so the result could be higher still.