Breakout candle

Trading the Breakout

Unconfirmed Breakout candle

In the Asian Forex trading session

the Euro traded up to 1.2525 but then market started to move down sharply due to the market news about Spanish bond yields (see 5 min chart).

Daily Double Top pattern

5 min Market News Trading

hourly Timing Setup

From the chart technical perspective the Euro formed a bear flag at about 8 a.m. GMT on the 5 min chart before resuming its down trend.

The Euro breached the weekly S1 and the monthly low of March 2009 initially after the 8 a.m. hourly candle closed at this level (red circle) and the new hourly candle started (Breakout Timing for Trading; 9 a.m. market news).

The strong bearish 5 min "news" breakout candle at 9 a.m. triggered the market order stops below the recent lows, particularly the low of the 8th of June at 1.2435 (pink line) and the stops below the March 2009 support level at 1.2456, which held the market this week.

However, the breakout candle at 9 a.m did not get confirmed on the 5 min chart (no close of the succeeding candles below the range of the breakout candle).

 The Euro found support at the daily S2 and the 61.80 % Fibonacci Extension (A-B at C) on the daily chart (stop clearing below the recent lows accomplished- first test).

The 5 min candle at 9:15 a.m.breached the daily S2 but closed above it and also in the range of the prior breakout candle and the Euro started to consolidate around the 1.2435 level (pink line-June 8th).

On the 5 min chart we see that the Euro found resistance at the pink line before breaching it to the upside.

The Euro closed above the daily S1 at 12.15 but found resistance at the weekly S1 so that market fell back into the consolidation around the pink line.

Neckline of the Head and Shoulders

Hourly Pin Bar

Test of the Neckline

Pin bar as Reversal pattern

The Euro found support at 1.2445 and formed a pin bar on the hourly chart. The bullish pin bar is a reversal pattern and it shows a strong demand at its level of creation. Hence, market was supported at this level and the strong rally back indicated a bullish rejection of the penetrated price level. The pin bar (bullish sign) led to some follow through and the Euro moved up to the 1.2500 zone

However, on the hourly and 5 min chart we see a kind of Head and Shoulders pattern. The brown neckline of the Head and Shoulders and the supporting upward sloping green trend line got broken at 1:15 p.m. GMT (confirmed on the 5 min chart).

1 hour Pin bar

5 min Head and Shoulders neckline test

As often, market retested the recent support which now became resistance (neckline, green line) at 1:35 p.m. (small red circle). However, the neckline/ green trend line held the market, which also coincided with the 5 min 20 SMA and 61.80 % Fibonacci (fib) retracement of the recent swing down.

The Euro initially moved down after the retest but market did a second retest of the brown neckline (green circle) after market got rejected at the 61.80 % fib extension and weekly S1 at 2:15 p.m. (pink circle).

If market strongly bounce back from the 61.80 % fib extension (no initial penetration or consolidation at this level then a temporary rejection of the current trend on this time frame is likely (either a reversal or a larger consolidation).

However, the Euro could not move above the neckline (green circle) and market resumed its downtrend and finally the Euro reached the Head and Shoulders target (100 % fib extension from the largest swing of the Head and Shoulders moved to the breach of the neckline) (blue cirlce).

Head and Shoulders target also coincided with the March 2009 support level and the 100 % Fibonacci  (fib) extension from the recent swing down. The Euro moved up from there but market penetrated this support level with the beginning of the new 4-hour candle at 4 p.m. after the prior hourly and 4-hour candle already touched (respected) the monthly low of March 2009. However, market only temporary breached this level (brown circle) and the Euro found support at the fib confluence level at about 1.2447 and the daily S1.

The Euro hold at the two 100 % fib extension and the 61.80 % fib extension (rejection) and market closed again above/ at the March 2009 support level (rejection). The Euro resumed its uptrend after the formation of two bull flags (first one at the 5 min 20-SMA resistance).

The price zone of the consolidation at 1 a.m. and at 6 a.m. (on the left of the 5 min chart) gave some support/resistance to the market as the Euro reached this price zone again.

Key Support and Resistance levels

Monthly and Daily Support/ Resistance

Monthly and Daily SR zones

Daily Support Resistance

Monthly Support Resistance

On the daily chart we see the importance of the key level at 1.2456 (monthly low of March 2009-purple line).

1 hour Daily Support Resistance

5 min Support Resistance

The Euro consolidated at the hourly 20 SMA in yesterday's late US session and resumed its up trend in the Asian session. The Euro moved up to the 100 % fib extension (5 min chart). From there, the Euro fell back into the price range of the prior consolidation and the Euro formed a kind of Butterfly pattern on the 5 min chart. Market moved to the 127 % fib extension (target of the butterfly: 127 or 161), which coincided with the 20 SMA on the 4 -hour chart before the Euro bounced back and moved below the low of the butterfly pattern (reversal pattern).


The 5 min chart also shows that the breakout above the recent high at 1.2524 did not get confirmed and market cleared the stops and limit orders above the recent high before the Euro reversed.

The prior consolidation pattern, the pivot point and the 61.80 % fib retracement terminated the retracement up to 1.2515 and market resumed its down trend. However, the Euro found strong support at the monthly low (March 2009) at 1.2456 as well as the daily S1 and weekly S1 and the 5 min breakout candle of yesterday's low (stop fishing-first test) did not get confirmed. The Euro moved up and found some resistance at the hourly 10 and 20 SMA (green circle on hourly chart).

The Euro resumed its downtrend, formed a bear flag and breached the monthly support initially with the beginning of the new 4-hour candle at 4 p.m. after the prior 4-hour candle already touched (respected) the monthly support. However, The Euro could not confirm a break below the monthly support on the 5 min chart and market bounced back from the daily low of June 12th (pink line) and the 100 % fib extension (hourly, 5 min chart).

The Euro moved up from the support level and formed a bull flag on the 5 min chart at about 4:30 p.m.. Furthermore, the hourly candle closing at 5 p.m. shows a strong rejection (pin bar) after the unconfirmed breach of the monthly support level. After the close of the hourly candle at 5 p.m. (confirmation of the strong pin bar) market initially moved up further from the small bull flag and cleared the stops above 1.25 level. The Euro found some resistance above the recent high (stop clearing target reached, 200 SMA on the 5 min chart).


Consolidation price zones (particularly the middle of this zone) very often provide some support/resistance at least for a temporary small bounce when price reaches this price zone again particularly for the first time (however, if one candle closes in the zone (respecting of the level) then the next might move through the consolidation price zone without a bounce (strong trend)). This price behaviour is visible in most of the circled consolidations on the 5 min chart for example the Euro found support at around 10 p.m. GMT, which is likely to be a consequence of the consolidation price zone at around 4 p.m. yesterday. Similarly, the consolidation in the late US session yesterday is likely to be the reason for today's support at this price level.The small consolidation at about 1.30 at the monthly support might not be a good example due to the Timing setup (4.p.m. and the strong tendency of the market to clear stops below highs/lows).

Double Top and Doji

Double Top on the Daily Chart

Doji pattern

Daily Double Top

1-hour Moving Average

Flag pattern

The Euro formed a Double Top chart Pattern whereby the second top is a doji on the daily chart. The EUR/USD initially moved down and reached the price target of the Double Top Chart pattern on thursday (EUR/USD Market Recap 21.06.12), which is the breach of the low between the two tops at 1.2557 (low of June 18th-blue line). The Euro found temporary support at the daily 20 SMA after market breached the blue line. The Euro is currently close to the 61.80 % fib retracement (1.2464) of the recent upswing (daily chart).

Flag pattern

On the 4-hour chart (left) we see that a kind of bearish flag chart pattern was formed. Today market triggered the bear flag and the Euro resumed its downtrend. The 10 SMA (red line) on the 4-hour and 1-hour chart pushed the Euro down. The Euro found some support at the 61.80 % fib extension from the recent swing down (A-B at C-see 4 hour chart).

5 min Flag pattern

The blue circles show some bear and bull flag chart patterns on the 5 min chart. The fib extension levels 61.80 % (initial target), usually 100 % and sometimes even 161 % (strong trend) are typical swing projection targets e.g. of the bull and bear flags. The swing down after the first bear flag moved  to the 161 % fib extension (breach of Friday's low-stop triggering). The swing down after the second bear flag only moved to the initial 61.80 % target and the swing up after the small bull flag reached the 100 % fib extension. The recent upswing on the 5 min chart found resistance at the 200 SMA and the 100 % fib extension.

The main question will be whether the Euro can make some larger retracements from the recent 61.80 fib extension on the 4-hour chart or whether the Euro is forming a new bear flag on the hourly/4-hour chart before resuming the down trend to the 100 % fib extension. The hourly 20 SMA and the 200 SMA on the 5 min chart currently provide some resistance.

Trendline break Timing

Trendline Analysis

When does a trendline break?

Daily Forex Chart Analysis

4 hour Trendline break Timing

Daily Chart patterns

On the daily chart (above) we see that yesterday's daily candle formed a doji and market formed a kind of double Top. The Euro dropped in today's European and US session and currently market penetrates the daily trendline and the Euro is close to the 20 SMA (purple line).

Breakout Timing 

On the 4-hour chart (left)  we see that the Euro touched (respected) the daily trendline (red) with the closing of the 4-hour candle at 4 p.m.. The Euro initially dropped further with the beginning of the new  4-hour candle starting at 4 p.m. (Timing) and the Euro penetrated the low of the 18th of June (green line).

hourly Support Resistance

On the hourly chart (left) we see that the Euro found resistance at the 61.80 % fib retracement (1) yesterday in the US session.

Today, the Euro found support at the monthly pivot point in the Asian session (2) and moved up to the 20 SMA (3) where the Euro bounced back. The Euro moved down and penetrated the monthly Pivot point at 8 a.m. whereby the breach of the recent low (grey line, (4)) did not get confirmed on the 5 min chart (stop fishing).

From there, market moved up and finally penetrated the daily pivot point at 1.2691 (5), however, the Euro did not confirm the breach on the 5 min chart (no higher close of the succeeding candles above the range of the breakout candle at 12:20 p.m.) and market formed a strong one-hour rejection candle (long tail of the 12 a.m. candle).

In the following, the Euro dropped down strongly. The 2 p.m. hourly candle respected (touched) the support level at 1.2624 (pink line-January low, orange circle) and market initially breached this level with the beginning of the 3 p.m. hourly candle.

The same pattern occurred at the hourly 200 SMA and the daily trend line (red line). Market touched this support level and immediately after the close of the hourly and 4-hour candle at 4 p.m. (Timing) the Euro breached this support level and resumed its downward trend (black circle).

5 min Support Resistance

The 5 min chart (above) shows the failed breakout confirmation at the grey line (A) and the daily pivot point (B). The red circle illustrates typical price behaviour around support and resistance. The 1:35 p.m. candle breached the monthly pivot but could not close below, however, the second breach got confirmed on the 5 min chart from the 2:05 p.m. candle.

The Euro moved up again but market could not regain the prior support level (no confirmed close above the  monthly pivot). The Euro also found resistance at the decreasing 10 SMA (red line), and the 5 min candle at 2:15 p.m. closed as a doji. The monthly pivot point now acted as resistance and price moved down. The green circle shows the bearish consolidation (bear flag) at the pink line (January low).

The Euro breached this level at 3 p.m. initially after the hourly candle closed at this support level. The same price behaviour occurred at 4 p.m.. In a strong bearish or bullish environment market often close at key levels and after market respected these levels with the candle close these levels often get breached with the beginning of the new candle (either for a false or confirmed breakout-Timing). This price behaviour is visible on all time frames. The blue circle on the 5 min chart shows the retest of the orange line (low of August 2010) after this level got breached (confirmed). The 20 SMA also pushed the price further down (trend continuation).

Market News Trading

FOMC News Release

News Trading in Forex

1 hour Market News Release FOMC

The daily EUR USD trading high of  the 11th of June at 1.2669 is another key level (blue line). Today, the Euro found some support at this key level in the Asian and beginning of the European session (hourly chart above). The Euro USD traded in a tight range prior to the FOMC market news release.

On the 5 min chart (below) we see that market formed a kind of Head & Shoulders pattern (ABCDE). The break of the brown neckline got confirmed with the news release at 5:30 p.m. GMT.

Just prior to the news release at 5:25 p.m. the Euro Dollar bounced back from the 100 % fib extension from C-D at E and market closed in the trading range of the preceding 5 min candle.

 After the news release the Euro (5 min candle-5:30) initially moved down to the Head & Shoulders target at around 1.2665 (B-D at F - blue circle, F= neckline break), also 161% fib extension C-D at E. From there market bounced back before the Euro resumed its downtrend to the weekly pivot point where the Euro found strong support and moved up again.

The Eur USD found some resistance at the brown neckline (touched-respected it, red circle) before market finally broke the neckline to the upside with the beginning of the new hourly candle at 6 p.m.. The chance of a temporary continuation of the uptrend and a breach of the high of the 5 p.m. hourly candle got increased due to the 5 p.m. hourly rejection candle (long tail) and the hourly close at the neckline. The 6 p.m. hourly candle breached yesterday's trading high.

Volatile Trading Environment

The volatile market after the news release led to a clearing of the stops below and above today's "pre-new release" trading session, which is not untypical for a news release (stop fishing targets).

5 min FOMC news trading

Resistance becomes Support

Resistance/ Support levels

Changing Role of Resistance and Suppor

1 hour Trading Signals  | Changing role Resistance to support

Resistance becomes support

On the 1 hour chart we see the changing role of the key level at 1.2588 (August 2010 low-orange line). Yesterday in the US session the Euro closed below this level at 3 p.m. GMT and in the following the Euro found resistance at the orange line. However, the Euro got supported by the hourly 200 SMA (black line) and the EUR/USD move above the orange line again in today's overnight session. Now, the orange line acted at support  (prior resistance becomes support) and the Euro did not close below this level on an hourly basis.

EUR/USD penetrated the orange line between 9 a.m. -10 a.m. but market bounced back again from the 200 SMA (yesterday's consolidation also provided some support at this price level) and closed finally above the key support on the hourly chart. From there, the Euro moved up to the next key level at 1.2624 (pink line-January low).

The Euro could not overcome this level for a while, however, EUR/USD also did not significantly bounced back from this resistance. The resistance got further strengthened due to the daily pivot at 1.2629. Market formed a bull flag on the hourly chart and the Euro broke through resistance (pink line) with the beginning of the 2 p.m. hourly candle after market repeatedly slightly penetrated this level during the three hour consolidation (bull flag-eroded resistance over time). Moreover, the bull flag terminated exactly at the 100 % time projection of the prior upswing (A-B at B, 5 min chart below).

After the break of the strong resistance (pink line) market gained strong bullish momentum. The 2 p.m. hourly candle closed above the weekly pivot, the 3 p.m. hourly candle above the monthly pivot and the 4-hour candle closing at 4 p.m. closed (respected) at the 61.80 % fib retracement and market breached the 61.80 % fib retracement initially after the 4 hour candle closed (red circle on hourly chart).

5 min Day Trading Strategies

On the 5 min chart we see that the Euro initially moved to the 61.80 % fib extension (A-B at C) after the breach of the pink line. The Euro found some resistance there and bounced back to find support at the rising 10 SMA (red line) on the 5 min chart and the Euro got repeatedly pushed up after touching the rising 10 SMA (strong bullish momentum).

The 5 min chart also highlights the changing role (support/resistance) of the orange line. EUR/USD repeatedly reacted at this level (1.2588).

Market Gap Trading

Market Gaps Analyzed

Closing the Market Gap

1 hour Gap Trading 

The Euro gaped up to 1.2748 and from there EUR/USD started to move down and completely retraced/ closed the market gap and the market even fell much further.

The 2 a.m hourly candle found support at the 10 SMA (red line) and the Euro started to retrace up to 1.2725 supported by the rising hourly 10 SMA. After the end of the upward retracement the Euro resumed its downtrend and closed today's gap.

The 8 a.m. hourly candle respected (touched) the hourly 20 SMA (purple line) after the Euro consolidated between the 20 SMA and 200 SMA on the 5 min chart, and the Euro initially broke through the 20 SMA with the beginning of the new hourly candle at 9 a.m. (London open- green circle on 5 min chart).

The Euro found some temporary support at the pink line (low of January) and formed an abc-retracement up to the monthly pivot point. From there, the Euro bounced back and penetrated the pink line again but market could not confirm the breakout on the 5 min chart.

5 min  Daily Gap Trading Setups

Changing role of Support and Resistance

Important levels and Patterns for Trading

Key Support/ Resistance

On the 4 hour and 1 hour chart we see that the Euro very often closed at (traded/ consolidated around) the low of January 2012 at 1.2624 key level, pink line), which coincides with the daily high of the 7th of June and the gap opening on Monday. Particularly on the 4 hour chart we see that every candle today closed at this important chart level.

4 hour Changing role from resistance to support

1 hour Daily Pivot Point S/R

Head and Shoulders neckline

On the hourly chart we see that the Euro respected the 61.80 % fib extension at 5 a.m. (recent high) and price moved lower from there. On the 1 hour and 5 min chart (below) we see a nice Head and Shoulders pattern. At 11:15 a.m. the Euro breached the neckline (brown line) (A) but market could not confirm this breakout (first test).

The second break of the neckline occurred at 12:45 p.m. and market moved to the 100 % fib extension (B). EUR/USD breached the daily pivot point - key level-, however, the pivot point, the 4-hour 10 SMA and trend line (4-hour chart) supported the market. The Euro managed to close above the neckline on the hourly chart at 2 p.m. after a choppy price action between the neckline and the weekly pivot.

On the 5 min chart (below) we again see the importance of the pink line and its changing role from resistance to support vice versa -key Support/ resistance chart level. The Euro formed a bull flag on the 5 min chart and in the following closed above the pink line after market already regained the neckline with the hourly close at 2 p.m.. The Euro bounced back from the pink line at 5:25 p.m. (now support) and cleared the stops above the recent high (C). However, market could not close above the recent high on the 5 min chart at the first breakout (only stop fishing) and the Euro fell back again.

5 min Important Tradind Chart levels and Patterns

Fibonacci Trading levels

Fibonacci extensions and Fibonacci

Fibonacci retracement

EURO US Dollar

found resistance at the 100 % Fibonacci extension (1.2603) (4) and bounced back to today's daily pivot point (1.2552) and the 61.80 % Fibonacci  retracement (6). From there, the Euro US Dollar formed a larger consolidation around the weekly pivot at 1.2564 on the hourly chart. During this consolidation the Euro Dollar did not confirm a break below the weekly pivot point on the hourly chart after yesterday's confirmed upward penetration of this level (4 p.m-yesterday) .

The recent consolidation pattern at yesterday's high (5) and the low of August 2010 (orange line/ weekly chart-last chart) seem to have capped the market to the upside recently (8). Since the break below orange line on Monday the Euro struggled to confirm an upward break through this level again on the hourly chart. However, the 4 p.m. hourly candle confirmed the upward break of the orange line on the hourly chart after market paused at the 61.80 % Fibonacci extension (3-4 at 7). But in general, the price action on the daily chart might be more important in analysing the price behaviour around weekly support/ resistance.

1 hour Fibonacci trading

On the 5 min chart (below) we see that the Euro retested the daily pivot point at about 10 a.m. GMT but market could hold at support. The initial breakout candle at 9:55 a.m.did not get confirmed on the 5 min chart.

The Euro consolidated around the daily pivot point (B) and moved up again (no confirmed break of the daily pivot point). The daily pivot and the recent consolidation (B) at this price level held the market again at 1:10 p.m (C) and the Euro moved up again. At 2:40 p.m. the Euro bounced strongly back from the weekly pivot point and the 61.80 % Fibonacci  retracement (D) after the Euro formed a higher low (1:10 p.m.) and higher high (1:55 p.m.) on the 5 min chart.

The Euro consolidated at the 61.80 %Fibonacci extension before market resumed its uptrend and breached the recent high (blue line-stop clearing target) but the Euro found resistance at the 61.80 % Fibonacci extension on the 5 min chart (G) (first breakout often false one) and market price closed below the blue line (recent high) on the hourly (4 p.m.). The Euro found some temporarily support at the price level of the prior consolidation (H) and market formed a bear flag before market went lower (not shown).

5 min  61.80 %  Fibonacci level

Weekly Chart Analysis

Fib extensions and retracements

Fibonacci Trading

 Fibonacci retracement and extension levels

1 hour  Fibonacci Trading

Today in the beginning of the European session the Euro moved up to the 100 % fib extension (1-2 at 3) and daily R1 at 1.2548. The Euro struggled with this resistance level although EUR/USD moved up close to the weekly pivot point (1:35 p.m. GMT, 4). However, EUR/USD failed to close above this resistance zone (1.2548) on the hourly basis so that market moved lower (1:35 p.m.) to find some support at the rising hourly 10 SMA (red line-5). From there, the Euro strongly moved up above the prior resistance zone at 1.2548 (second test) and market was able to close above the weekly pivot on the hourly (second test) and 4-hourly basis (candle close at 4 p.m.). The hourly candle (3-4 p.m.) approximately closed at (respected) the 61.80 % retracement and daily R2, which in the following got broken with the beginning of the next hourly candle (4-5 p.m.) and the Euro moved up to the 100 % fib extension at 1.2603 (6).

5 min Butterfly sell pattern

Fibonacci Retracement at 61.80 %

On the 5 min chart we see that the Euro very often reacted at the 61.80 % fib retracement marked with the 0 on the 5 min chart and also at the 100 % fib extension market with the 1 on the 5 min chart (important Fibonacci levels). At the beginning of the London trading session at 9 a.m. the Euro made a abc retracement before market moved up to the 100 % fib extension at 1.2554. In the following market formed a typical 3-wave consolidation pattern/ butterfly (circled). After the termination of the consolidation the Euro reached the typical butterfly target (127 % fib extension-1-0 at 0) before EUR/USD reversed and took out the low of the prior consolidation (1.2526), which is also typical for a butterfly pattern. The Euro found support at the 10 SMA on the hourly Chart (2-3 p.m.) and formed a kind of ending diagonal on the 5 min chart (ED). In the following, the Euro strongly moved up to the 100 % fib extension, where market consolidated.

Pivot Points as Support and Resistance

Flag pattern and Pivot Points

Bear and Bull Flags

1 hour Daily Pivot Point S/R

In the Asian session, the Euro found support at the weekly S1 and market formed a kind of doji/ pin bar (reversal candle) on the hourly chart (Yesterday's low-blue line). From there, the Euro moved up to the 20 SMA (hourly) where market found some resistance (5 a.m.) (1) before market moved above the 20 SMA up to the daily pivot point at 1.2522 (2).

Daily Pivot Point Trading

The Euro reversed at the daily pivot point and market targeted the recent hourly low at 7 a.m. to clear some stops (3) (no breakout confirmation of the hourly low on 5 min chart) before the euro moved up again and penetrated the daily pivot point (4). However, we see on the 5 min chart (B) that market never confirmed a break of the daily pivot point (no close above the breakout candle).

Market rolled over at the daily pivot point and targeted yesterday's daily low. Yesterday's bearish daily candle made a retest of this low very likely (bearish sentiment) and many stop and limit orders are expected to be below yesterday's low. Market cleared these orders and bounced back and closed again at/ above the weekly S1 on the hourly chart (first breakout is often a false breakout).

On the 5 min chart (below) we also see that the breach of the weekly S1 and yesterday's low did not get confirmed. The 5 min candle at 3:05 p.m. closed at the weekly S1 (respected it) and the following breakout candle penetrated this support level, however, there was no succeeding candle which closed below the range of the breakout candle. Moreover, market bounced back at the 100 % fib extension from C-D at E.

Today's price action in the European session might be seen as a Head and Shoulders pattern (ABC) with the green line as its neckline (5 min chart). Market formed a nice 3 wave consolidation pattern at the neckline (visible on the 1 min chart-bear flag) just prior to the breakout (D)

5 min Flag patterns

On the 5 min chart we also see that the Euro bounced back after the unconfirmed breach of the weekly S1 and yesterday's low (blue line) (F), moved up to the 20 SMA (3:45 p.m.) where market consolidated before the Euro went up further and formed a bullish consolidation (bull flag). The green neckline seemed to provide some resistance. The bull flag got triggered, supported by the rising 20 SMA on the 5 min chart and market moved up again.

Gap Analysis in Forex

Trading the Gap Close

Monthly Pivot Trading

4 hour Timing Trading Strategies

Daily Monthly Pivot Point

Trading market Gaps in Forex

The Euro opened with a market gap to 1.2624, which is the resistance zone of the 61.80 % fib retracement and the low of January 2012 (orange line) (EUR/USD Market Recap 07.06.12).

Market moved above this resistance (second test) but could not overcome the monthly pivot point at 1.2661. From there, the Euro bounced back and in the following EUR/USD (Forex) closed the gap from today.


On the 4 hour chart we see that the 4-hour candle closing at 12 a.m. GMT respected (closed at) the weekly pivot. Initially after the 4 hour candle closed market breached the weekly pivot point and EUR/USD formed a typical 3-wave consolidation pattern (5 min chart) below the weekly pivot before market resumed its down trend to close today's gap (Gap Trading).

1 hour Gap Trading

On the 1-hour chart we see that the Euro also closed at (respected) the daily pivot with the 3 p.m. candle before market initially breached the daily pivot point in the beginning of the next hourly candle.

Forex Market currently found some support at the daily 10 SMA.

Fib extensions

Trading the Fib extension levels 

Important Fib Extensions: 61.80 % 100 % 161 % 

Daily Candlestick pattern Doji

Yesterday, the Euro found resistance at January's low 2012 (orange line) and the 61.80 % fib retracement of the recent swing (EUR/USD Market Recap 07.06.12).

Yesterday's daily candle could not close above the 20 SMA and closed in the price range of the prior daily candle (false breakout). Furthermore, market formed a Doji bar or evening star chart pattern, which led to a sharp drop in price in today's Asian and European session.

1 hour Weekly Pivot point S/R

Fibonacci Levels and Fibonacci Trading

On the hourly chart we see that the sharp price drop started at 1 a.m. GMT ,right after yesterday's daily doji bar closed. The Euro got initially pushed down by the 10 SMA and 20 SMA. The price drop at 1 a.m. triggered the bear flag (blue circle) and the Euro moved to the 100 % fib extension (A-B at C ) and formed the second bear flag (D) at the green trend line and the 100 % fib extension (also 61.80 % fib retracement).

In the following, the Euro broke put of the bear flag and resumed it's down trend  to the weekly pivot point. (EUR/USD respected the resistance in form of a bear, which means that market could not sufficiently bounce back from support-bearish signal). Recently, market respected (touched) the hourly 10 SMA (green circle) at 3 p.m. and broke through it with the next hourly candle. The 4-hour candle closing at 4 p.m. also looks like a doji (support at the weekly pivot).

5 min ending diagonal, bear flag

On the 5 min chart we see the different bear flags (circled). After EUR/USD broke out of the first bear flag (blue circle) the Euro went to the 161,80 % fib extension (1-2 at 3) where market formed the second bear flag (red circle).The Euro broke out of the bear flag and went to the 100 % fib extension (5-6 at 7).

The EUR/USD found support at the weekly pivot (slightly penetrated but no confirmation, stop fishing below the low of June 6th-blue line) where it formed a kind of ending diagonal ((8-impulsive,9-correction, abcde-ending diagonal). The correction high (9-green line) is the initial target after the ending diagonal terminated, which market reached quickly (directional move). Recently, the Euro found resistance at the daily S2 (1.2492-not shown), the prior consolidation (red circle) and particularly the 61.80 % fib retracement (5-e-not shown) at 1.2493.

Weekly Chart Analysis

Weekly and Daily Analysis

Inverted Head and Shoulders

Weekly Chart Analysis

Daily Chart Analysis

On the weekly chart we observe that the Euro moved up to the January 2012 low (orange line).

On the daily chart we see that EUR/USD respected (closed at) the 20 SMA yesterday and today price moved above the 20 SMA up to the January's low at 1.2624 (orange line) and the 61.80 % fib retracement at 1.2620. This resistance zone held the Euro and price fell back from this level into the price range of yesterday's daily candle. EUR/USD already failed to recapture the low from January 2012 on May 28th (recent high from May 28th coincides with January's low).

1 hour EUR/USD forex chart analysis

On the hourly chart (above) we see that the Euro started today's up move from the recent swing high at 1.2543 (blue line-C). After the back test of this level (resistance became support-C) EUR/USD moved above the weekly R1 but market found  resistance at the orange line (low from January 2012), 61.80 fib retracement, daily  R1 and the 61.80 % fib extension (A-B at C)

Overall, the Euro could not overcome this resistance zone at about 1.2624 and in the following price sharply fell back from resistance at 4 p.m. before price found solid support at at the 10 SMA on the 4 hour chart at 1.2546 (4 p.m. candle-not shown) closely to the recent swing high (blue line-support-D) at 1.2543.

5 min Inverted head and shoulder

On the 5 min chart we see that EUR/USD formed a typical 3 wave consolidation pattern at the price level of the weekly R1 (between 1-2 p.m.) before the Euro resumed it's uptrend terminating at the resistance zone. The Euro reversed sharply and took out the recent striking low at 1.2562.

Inverted Head and Shoulders chart pattern

The recent consolidation from the beginning of today's European session (8 a.m. - 10 a.m.-not shown) provided some support and led to a pause of the sudden price drop before market headed up again at 4:35 p.m. after price reached the 10 SMA on the 4 hour chart (not shown). The Euro formed a kind of inverted Head & Shoulder (3,4,5), which got triggered and market moved up to the consolidation pattern at today's high (6).

Ending Diagonal Triangle

Triangle Consolidation Break

Ending Diagonal Pattern

Daily 20 SMA

On the daily chart we see that the Euro moved up into the important price zone of the prior consolidation and the 20 SMA, which both should act as resistance. A bit higher at 1.2588 (not shown) also stands the weekly low from August 2010, which got respected (closed at) two weeks ago and broken last week.

1 hour triangle breakout, ending diagonal pattern

Typical 3 wave consolidation

On the 1 hour chart we see that EUR/USD formed a typical 3 wave consolidation (CDE) just before today's breakout. Yesterday, the Euro found support at the apex of the red triangle (C) and today price found resistance at the daily R1 (D) and support at the weekly pivot point (E) where the consolidation pattern terminated and EUR/USD started to move up to break the important consolidation high at 1.2543 (B).

The Euro moved initially up to  the 61.80 % fib extension C-D at E where market temporarily paused before price resumes it's up trend to the 100 % fib extension (F). The Euro is currently trading at daily resistance and the 61.80 % fib extension from A-B at C and the 100 % fib extension from C-D at E (F).

5 min EUR/USD chart analysis

On the 5 min chart we see that the recent 100 % fib extension from 1-2 at 3 also stands at the current resistance zone. We also see that  the Euro paused as it reached the 61.80 % fib extension (C-D at E) (2). Later on market formed a bull flag before price moved up to the confluence resistance zone, where price started to fall back after the creation of the bearish candle (Doji)

Triangle Pattern

Consolidation Price Zones

Triangle Chart pattern

4 hour Consolidation Price Zone

Price Breakout

The Euro broke through the daily low of May 25th (pink line) and market found some resistance in the price zone of the prior consolidation (red circle) and the gap (brown lines) at about 1.2543. From there, the Euro returned sharply and found some support at the 20 SMA on the 4-hour chart, the consolidation (blue circle on 4-hour and red triangle on hourly chart) and daily S1 at about 1.2410.

The Euro moved up a bit to the daily pivot (1.2467) where price found resistance whereby the weekly pivot (1.2444) provided support and resistance depending on price action on the 5 min chart (not shown).

The 1 hour chart below shows yesterdays consolidation (red triangle), which gave some support in today's trading session.

1 hour Triangle Consolidation pattern

Ending diagonal pattern

Fibonacci Chart Patterns

Fibonacci extension level

4 hour Fibonacci extension levels

On the 4 hour chart (left) we see that the 100 % fib extension from A-B at C and the weekly S2 provided support and the Euro returned sharply from this level.

The hourly chart below shows that the Euro formed an ending diagonal (wave C-D) after the termination of the impulsive A-B wave plus the succeeding correction wave up to point C.

The last wave of the ending diagonal (e) penetrated the weekly S2 and the 100 % fib extension (red line) (no confirmation) before the Euro turned around sharply and immediately moved up to the initial price target at point C-blue line (beginning of the ending diagonal).

1 hour Elliott wave theory, ending diagonal pattern

5 min Ending diagonal pattern

100 % fib extension

On the 5 min chart we see that the Euro moved up sharply after reaching the support zone at the 100 % fib extension (red line) and that market ignored all resistance levels in between to move directly to the initial price target (beginning of the diagonal). This price behaviour is typical after a pattern terminated, particularly an ending diagonal (directional move). In the following market found support at the 100 % fib extension of A-B at C and resistance at the 100 % fib extension of D-E at F plus the weekly S1.