Trading Support and Resistance – USD/CHF, AUD/JPY

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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:

• Trading the two currencies that are trending the most strongly over the past 6 months.
• Trading against very strong weekly counter-trend movements by currency pairs made during the previous week.
• Carry Trade: Buying currencies with high interest rates and selling currencies with low interest rates.

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:

Monthly Forecast October 2023

For the month of October, I forecast that the USD/JPY currency pair will gain in value.

For the month of September, I forecasted that the USD/JPY currency pair would gain in value.

The result was as follows:

Weekly Forecast 1^st October 2023

This week, I give no weekly forecast, as there were no strong counter-trend price movements last week.

Last week, I forecasted that the GBP/NZD currency cross would rise in value. Unfortunately, it fell by 0.89%.

.Directional volatility in the Forex market was down last week with only 19% of the most important currency pairs fluctuating over the week by more than 1%. Volatility is likely to remain low over the coming week, as there are few high-impact data releases scheduled.

Last week was dominated by relative strength in the New Zealand Dollar, and relative weakness in the Canadian Dollar.

You can trade my forecasts in a real or demo Forex brokerage account.

Key Support/Resistance Levels for Popular Pairs

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:

USD/CHF

I had expected the level at $0.9217 might act as resistance in the USD/CHF 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 during last Wednesday’s New York session (which can be a great time to enter trades in major currency pairs like this one) with an inside bar, marked by the down arrow in the price chart below signaling the timing of this bearish rejection. This trade was nicely profitable, giving a maximum reward to risk ratio of more than 4 to 1 based upon the size of the entry candlestick structure.

AUD/JPY

I had expected the level at ¥94.85 might act as support in the AUD/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 during last Wednesday’s New York session with an inside bar, marked by the up arrow in the price chart below signaling the timing of this bullish rejection. This trade was nicely profitable, giving a maximum reward to risk ratio of more than 4 to 1 based upon the size of the entry candlestick structure.

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