Trading Support and Resistance –USD/JPY

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 April, I forecast that the EUR/USD and GBP/USD currency pairs will rise in value.

I made no forecast for the month of March, as the Forex market was so unsettled and volatile.

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 remain the same or even increase by a little over the coming week, as there are several high-impact scheduled data releases scheduled.

Last week was dominated by relative strength in the Canadian Dollar, and relative weakness in the Japanese Yen.

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 one of these key pairs last week off key support and resistance levels could have worked out:

I had expected the level at ¥130.43 might act as support in the USD/JPY 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 at the start of last Tuesday’s New York session (which can be a great time to enter trades in major currency pairs like this one) with a large engulfing candlestick, marked by the up arrow in the price chart below signaling the timing of this bullish rejection. This trade was profitable, giving a maximum reward to risk ratio of more than 3 to 1 based upon the size of the entry candlestick structure.

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