Trading Support and Resistance – USD/CAD, EUR/JPY – 26 February 2023
This week I will begin with my monthly and weekly Forex forecast of the currency pairs worth watching. The first part of my forecast is based upon my research of the past 20 years of Forex prices, which show that the following methodologies have all produced profitable results:
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:
For the month of February, I forecasted that the EUR/USD currency pair would rise in value.
The performance so far is follows:
Last week, I made no weekly forecast, as there were no unusually strong counter-trend price movements in the Forex market the previous week. The situation remains the same, so I again give no weekly forecast this week.
Directional volatility in the Forex market is likely to be lower over the coming week.
Last week was dominated by relative strength in the US Dollar, and relative weakness in the Japanese Yen and the Australian Dollar.
You can trade my forecasts in a real or demo Forex brokerage account.
I 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 monitored on the more popular currency pairs this week.
Let us see how trading two of these key pairs last week off key support and resistance levels could have worked out:
I had expected the level at $1.3656 might act as resistance in the USD/CAD currency pair last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level right during Friday’s New York session (typically a great time to enter trades in major Forex currency pairs) with a doji candlestick, marked by the down arrow in the price chart below signaling the timing of this bearish rejection. This trade has been profitable so far.
I had expected the level at ?142.34 might act as support in the EUR/JPY currency cross last week, as it had acted previously as both support and resistance. Note how these “role reversal” levels can work well. The H1 price chart below shows how the price rejected this level right at the start of last Friday’s Asian session (typically a great time to enter trades in Forex currency crosses involving the Japanese Yen) with a large doji candlestick, followed by a bullish inside candlestick. marked by the up arrow in the price chart below signaling the timing of this bullish rejection. This trade has been profitable, achieving a maximum positive reward to risk ratio of more than 2 to 1 so far based upon the size of the entry candlestick structure.
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