In an effort to develop a more robust daytrading template for the EUR I’ve added some fib lines. The spread displayed captures the range from the Sept 30 low of 1.3570 to the high of 1.3675.
For those not familiar with Fibonacci lines, they act in much the same manner as the pivots in providing fractal support/resistance levels. The difference between the pivots and the fibs, of course, is that the pivots are based on objectively defined values for the high, low and close while the fibs are much more of an adaptive tool as the trader can explore any trading range that looks interesting. Both the fibs and pivots often provide valuable barometers of momentum as well as highlighting price points that warrant close attention as likely breakout or breakdown levels. The case in point for this chart is the Oct 1 price action dead on 1:00, on 5 minute bars where the EUR dropped 25 pips on a single bar, with the bar tail neatly divided by the 61.8% fib line. What’s really interesting is that this was actually the last pullback before the EUR began a 45 degree ascent over the next 4 hours to 1.3761, another 100 pip leap. Overnight the Dipper booked 55 pips while the straddle was never implemented as the 4 hour narrow range consolidation pre-requisite was never met. This fact in and of itself may have presaged the coming run-up but some thorough backtesting will be required to confirm this suspicion.
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