Gap Trading and Fibonacci Analysis

Fibonacci levels

How to trade a market gap

After the recent price rejection and the taking out of some major market lows (EUR/USD Market Recap 23.05.12), the EURO consolidated in the price range zone around 1.2550 during recent trading days (see 4-hour chart). The recent market low from Friday's trading session at 1.2496 occurred at the 100 % Fibonacci Extension from A-B at C and the round number -1.25 (4-hour chart).

4 hour EURUSD  Market Gap Trading

1 hour Forex  Market Gap Analysis

The pice gap down

The EUR/USD market gaped up and found resistance at the market low from January 2012 at 1.2625 (pink line). Market price slightly penetrated (3) the high from the 24th of May (stop fishing) at 1.2620 before market price turned around.

On the hourly chart, the circled consolidation during the Asian session (2), the 20 SMA (hourly-purple line),  daily R1 plus the 200 MA on the 5 min chart held the market for a while before EUR/USD broke down at 2 p.m. (5).

Market respected (hourly close at) the support level of the red line (market low from May 23 on the hourly chart), the green trend line at 1.2545 (hourly chart) (4) and also the 61.80 %  Fibonacci Retracement, 100 % Fibonacci extension, the daily pivot point at this support zone (red circle) before market price went down a bit further immediately in the beginning of the new trading hour at 3 p.m. (Breakout Timing). However, market price seems to consolidate around this key support level and might calm down on today's US Memorial day.

Friday's close at around 1.2518 (Market gap close) and the surrounding consolidation (1) might provide some further support.

5 min Euro US Dollar  technical chart analysis