Post of the Day: Fibonacci Retracements

[B]Student’s Question:[/B]

The pair looks to me as if it is trending between the upper and lower horizontal lines - for the time being. The last significant low (not shown on this chart but which can be seen on the daily chart in my post just below this one) broke the pattern of lower lows that has held for the last few months and I think most traders are waiting to see if we resume the downtrend or whether the GBP will move from these historic lows back to a more accustomed level against the USD. A breakout one way or another might come with next week’s economic data from the states.

[B]Power Course Instructor’s Response:
[/B]
Nice job in identifying the range…

Since the trend on the Daily chart is down, the trades with the greater likelihood of success using this range will be the ones that would be those taking a short position at resistance with a stop just above it.

Keep in mind that since the resistance line was compromised on February 23, the resistance line will have to be moved up to account for that price action. While it may not trade up to that level again, it is important to be aware that it did and may do it again. If, for example, a trader shorted the pair at the 1.4574 resistance level with a stop just above that and did not account for the fact that price action traded slightly beyond 1.4650, they could be stopped out should the pair trade up to that level again.

Once the body of a candle closes above or below a S/R line, from that point forward the line has been compromised.

The lines can go through wicks but they cannot go through bodies without being negated.