'Market and Human' Psychology perspectives with tips on how to avoid common mistakes by Pierre Charlebois, Senior Trading Coach at www.TradingPostFinancial.com
Using Fibonacci ratios to manage your trades efficiently
by Sunil Mangwani
November 23, 10:00 GMT
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The EUR/USD has been confined to a narrow range over the last 20 days.
The range has narrowed considerable in just the last week, so a break is due shortly. There is roughly equal argument for the direction of the break. The next 48 hours or so should give way to the range break-out.
The GBP/USD has retraced virtually all of it’s losses since early October. The August top of 1.7040 is in striking distance.
The ascending trend-line appears to be containing the current price action. It should be respected as reasonable support.
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The price did not make a new high on the pair but came within pips before reversing.
What should be observed then is 1.4626. This may be an important support.
Let’s see if a new Chanel is indeed forming.
In keeping with the “Keeping it Simple trading 101″ theme; the price on the EUR/USD has touched and reversed on the lower channel trend-line.
The question now what to do next.
1. Wait for a break lower and pick a point higher in the price action as a stop OR
2. Consider a buy with the current low as a stop or wait for another 4 hour candle to close and consider it’s low as a stop…
3. Or as we are near the old top; stay on the sidelines until we break out further as at this point the daily range is also mid-channel.
Here’s a view of the upward channel on the EUR/USD.
In my opinion, any new highs at the top of the channel around 1.51 would require re-evaluation to look for selling opportunities.
In between at current levels is the hardest place to assess.
The EUR/USD is just shy of the recent top.
The pattern is not a clear 5 wave up. It is difficult to access the pattern at this time on the lower time frames at the market is so volatile that nice clear waves are not evident.
The alternate possibility is an ABC up. This presents two scenarios. One is a correction and the top is in place. The other is it is wave 1 of a 5 wave ending diagonal.
All three potentials suggest at least a correction down somewhere in the current price range. With the uncertainty however it means the high may be broken.
Dollar index potentialy at cusp of reversal
The index has made a new low, which now opens the door to a reversal.
A final thrust lower is always a possibility however a turn here could signal a potential end to the trend. Be patient and wait to see if a USD bottom appears to form.
Most USD pairs may be forming tops. Look for some sort of blow off or obvious reversal pattern.
We have seen a very strong two day reverse on the USD gains.
The price on the index currently sits at the .618 retracement so much lower and the old bottom may be eclipsed whereas a turn at current levels would be typical of a 1-2 in Elliott Wave terms.
If we make new lows on the index I would expect another sudden reversal back up. We may find the market choppy and volatile for the rest of the week until we settle this trend change.