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