Trading Support and Resistance – GBP/USD, USD/CAD

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 June, I forecasted that the GBP/USD currency pair would rise in value.

The performance of this forecast so far is as follows:

Last week, I made no weekly forecast, as there were no unusually large counter-trend price movements, which is the basis of my weekly trading strategy. There were again no such price movements last week, so I again make no weekly forecast for the coming week.

Directional volatility in the Forex market decreased last week with 37% of the most important currency pairs and crosses fluctuating over the week by more than 1%. Volatility will probably be even lower over the coming week, as the weekly schedule has fewer items of high importance than it did last week.

Last week was dominated by relative strength in the US Dollar, and relative weakness in 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 $1.2698 might act as support in the GBP/USD 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 not long after the start of last Wednesday’s London session (which can be a great time to enter Forex trades in European currency pairs such as this one) with a large doji 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 approximately 4 to 1 based upon the size of the entry candlestick.

I had expected the level at $1.3141 might act as support 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 not long after the start of last Thursday’s London session (which can be a great time to enter Forex trades in semi-major currency pairs such as this one) with an inside bar / engulfing bar combo, 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 so far based upon the size of the entry candlestick structure.

Ready to trade our Forex weekly analysis? We’ve shortlisted the best Forex trading brokers in the industry for you.