Trading Support and Resistance – EUR/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 July, I forecast that the USD/JPY currency pair will rise in value.

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

The final performance of this forecast was 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 not one of the most important currency pairs and crosses fluctuating over the week by more than 1%. Volatility will probably be higher over the coming week, as the weekly schedule has a couple of items of high importance, and we are also seeing the start of a new calendar month.

Last week was dominated by relative strength in the Euro, and relative weakness in the Canadian Dollar and 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 ¥155.91 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 not long after the start of last Monday’s London session (which can be a great time to enter Forex trades in European currency pairs such as this one) with double inside bars, 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 5 to 1 based upon the size of the entry candlestick structure.

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