By Greg Holden – Traders can sometimes forget the significance of support and resistance levels. These price barriers represent points in the market where, for some reason, traders consider them significant and rethink strategies when they are reached. For the EUR/USD, the 1.3875 price line represents one of the more significant (although arbitrary) support lines for this pair, as the chart below will demonstrate.
– The below chart is the daily chart for the EUR/USD and almost shows the movement of this pair over the entire course of 2009-2010.
– As can be seen at Point 1, the price level of 1.3875 represents the 50% Fibonacci retracement level (considered one of the more important price lines next to the 61.8% and 38.2% levels). Since the price has now reached this level, it should face some serious support.
– Point 2: The Relative Strength Index (RSI) shows this pair being over-sold and the indicator is now cascading upward, which suggests bullish momentum.
– Point 3: The Stochastic (slow) has what appears to be a relatively recent bullish cross, suggesting the subsequent movement may be in an upward direction.
– All of this data leads one to the conclusion that the 50% Fibonacci retracement line indeed represents a significant barrier to further downward movement in the EUR/USD and both of the indicators below support the notion of a future upward correction.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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