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Using Fibonacci to Identify High Risk Levels in Currency Trading

Using Fibonacci to Identify High Risk Levels in Currency Trading

2012-10-05 20:11:00
Jamie Saettele, CMT, Sr. Technical Strategist
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Euro / US Dollar

Daily

Using_Fibonacci_to_Identify_High_Risk_Levels_in_Currency_Trading_body_eurusd.png, Using Fibonacci to Identify High Risk Levels in Currency Trading

Prepared by Jamie Saettele, CMT

The EURUSD response at short term channel resistance is suggestive of a deeper setback. Expect support from former resistance at 12935/70. A near term constructive bias is warranted on dips against 12900 with 13115 and 13170 in focus. Longer term, the EURUSD is at a high risk area for bulls (38.2% of decline from 2011 high) and that risk increases (decreases for bears) with each tick towards the May, March, and February highs.

Euro / Japanese Yen

Daily

Using_Fibonacci_to_Identify_High_Risk_Levels_in_Currency_Trading_body_eurjpy.png, Using Fibonacci to Identify High Risk Levels in Currency Trading

Prepared by Jamie Saettele, CMT

The EURJPY ripped through the 61.8% retracement Friday before failing shy of the JS Thrust day close from 9/14 (10289 was the level…the high was 10280). Like the EURUSD, a topping PROCESS is probably playing out that takes the next few weeks. 10146/82 is of interest as support and a drop below 10071 would trigger a change in bias (much like EURUSD 12900) and bring 9797 into play.

Australian Dollar / US Dollar

Daily

Using_Fibonacci_to_Identify_High_Risk_Levels_in_Currency_Trading_body_audusd.png, Using Fibonacci to Identify High Risk Levels in Currency Trading

Prepared by Jamie Saettele, CMT

Focus this week was on shorting the AUDUSD and the latest Daily Technicals noted that “exceeding (10225) that level would expose 10290 (former support) and present a higher reward/risk opportunity against 10405.” The AUDUSD made it to 10270, meandered for the last 2 days, and then started plummeting towards the end of the US session. Focus remains on the 61.8% retracement of the advance from 9580 and 6/25 low at 9968/79. Former resistance at 9900 (in May) is also of interest. Near term resistance is 10213/40. The AUDUSD is at the bottom of its multi month range so understand that you are playing a breakout if going short. Breakouts typically require wider initial risk. In this case, my bearish risk is 10375 although that should be minimized quickly if the break plays out.

Australian Dollar / Japanese Yen

Daily

Using_Fibonacci_to_Identify_High_Risk_Levels_in_Currency_Trading_body_audjpy.png, Using Fibonacci to Identify High Risk Levels in Currency Trading

Prepared by Jamie Saettele, CMT

I covered the pattern unfolding at multiple degrees of trend in the AUDJPY last week but am updating risk levels this week. A break of the July and September lows would be significant and shift focus to 7793 and 7564. Near term bearish risk should be kept to 8125 given that the AUDJPY is still sitting on major support and there is the risk of getting caught in a squeeze.

OTHER PAIRS OF INTEREST

AUDCAD – is attempting a break of major support. 9986-10008 is resistance. The downside is valid against 10095 towards a major Fibonacci confluence at 9250-9400. Be aware of the March 2011 low at 9628.

NZDUSD – is breaking 8185 support on its 5th attempt. The downside is valid against 8265. 8195 is resistance and focus is on 8127 (9/7 close) and 8001 (38.2% of rally from 7444).

EURAUD – A large range week may signal the beginning of upside exhaustion. 12980-13030 is a high risk area for bulls that may provoke a response.

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele

To be added to Jamie’s e-mail distribution list, send an e-mail with subject line "Distribution List" to jsaettele@dailyfx.com

Jamie is the author of Sentiment in the Forex Market.

Meet the DailyFX team in Las Vegas at the annual FXCM Traders Expo, November 2-4, 2012 at the Rio All Suite Hotel & Casino. For additional information regarding the schedule, workshops and accommodations, visit the FXCM Trading Expo website.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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