Forex Chart Pattern Trading Analysis | FX Market Price Manipulation

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

Un-/ Confirmed Breakout Candle

Fib Retracement and Fib Extension

Failed Breakout candle

On the hourly chart we see that we consolidated (ABC) again "overnight", however, this time we broke the consolidation to the upside, which lifted the market up to the daily R1 at 1.26 (D) before market turned around and breached yesterdays low (orange line-E). Market found some support at the weekly S2, daily S1 and the 100 % fib extension (Z-A at D) in the American session.

The red line on the hourly chart shows the important low (23 May) after the recent impulsive move down. Yesterday's two breakout candles (at 8 a.m. and 6 p.m.) did not get confirmed by a lower close of the succeeding candles below the range of the breakout candles on the hourly chart. The purple line shows the low of the second breakout candle which did not get confirmed by a close below this line/candle during the consolidation. This non confirmation might be a reason for the upside breakout of the consolidation.

1 hour Explaining Technical Chart Analysis

The following upside swing on the hourly chart above (7 a.m.) respected the 61.80 % fib retracement from the prior down swing (Z-A) with the close of the 8 a.m. hourly candle (F) at this level (1.2582) before the succeeding hourly candle made a false breakout (closed inside of the body of the preceding hourly candle and no Breakout Confirmation on the 5 min chart).

Today's high was the end of the larger three wave consolidation pattern (triangle ZCD green lines)) which started after yesterdays false breakout at 9 a.m, where price turned around in a V shape pattern at the support level + 61.80 fib extension.

5 min Understanding Technical Chart Analysis in Forex

On the 5 min chart we see that the breakout candle at 9:10 a.m. (1) (after the prior hourly candle closed at the 61.80 % fib retracement) did not get confirmed. Market consolidated between 10 and 11:15 a.m. and price broke down and moved to the 100 % fib extension (ab=cd) at (2). The prior consolidation gave resistance to the following upside swing (3) and market reversed and went down with strong momentum. We see that market tried to defend the red line (low from two days ago) (4), however, market dropped down strongly at 1:25 p.m..

The Euro breached yesterday's low (orange line) but the two breakout candles did not get confirmed and market created a kind of wedge pattern. The 1 p.m. hourly candle respected (closed at) the weekly S2.

During the new trading hour (2 p.m.) market got pushed down by the decreasing 10 SMA and breached only temporarily the weekly S2 to bounce back at the daily S1 to trigger the wedge pattern breakout to the upside (5). The up move found resistance in the price zone of the small consolidation, the 200 SMA and particularly the red line (6).