“INDICATOR OF THE DAY” - 61.8% FIBONACCI RETRACEMENT
Euro price action has been quite volatile of late and with the market expected to continue to chop around, incorporating Fibonacci analysis into trading can prove to be an invaluable tool that sets up good risk/reward trade ideas.
The surge in Eur/Usd price action on Thursday left many traders scratching their heads, wondering just how much gains could extend before some form of a pullback. However, by incorporating Fibonacci retracements into our analysis, we were able to see that the market stalled by the 1.3500, 61.8% fib retracement off of the latest relevant 1.3740-1.3115 move, which nearly directly coincided with Thursday’s highs by 1.3515. While we never recommend using one indicator alone to establish a position, with the market already severely overbought on an intraday basis at that point and also testing psychological resistance by 1.3500, establishing a counter-trend short by the 61.8% proved to be a compelling trade.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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