The Dollar Rally According To Fibonacci


The EUR closed below both the 100 day and 50 day moving averages. The candle that caused the fall also initially broke below the 38.2% Fibonacci Retrace level. This level is generated by using the low of 2010 followed by the recent high at 1.33. Yesterday’s price action bounced off the 50% Retrace level before actually pushing the EUR higher on the day. The next several days will be crucial in determining the direction of the EUR over the short run. The 50 MA is poised to cross above the 100 MA which provides support for the EUR to again move higher. If we see a solid close above the 50 MA after the cross, the EUR will most likely re-test Resistance at 1.30. However, if price head south first and closes below the Fibonacci 50% level at 1.26 the EUR may re-test 1.2450 which also coincides with prior Resistance (see blue arrow).


The GBP met Resistance just south of 1.60 after touching an earlier intra year low at 1.4250. Using the Fibonacci Retrace tool between those two points generates the 23.6% Retrace level at 1.5580. Look at the number of times the GBP refused to close below that level (see red arrow). When price finally closed below that Retrace level, we saw a breakout occur. Yesterday’s price action touched the 50 day MA during intra day trading, and although it bounced off that level we still closed below the 200 day MA for the first time in almost one month. If price can find Support at the 200 day MA and break back above the 23.6% level, or 1.5580 then we may see the GBP have another go at 1.60. However, if price closes below the 50 day MA and takes out the Fibonacci 38.2% Retrace level the GBP will likely look for Support just above 1.50, near the 100 day MA.


We have commented before that Gold has been trading the technicals nearly perfectly. Using the Fibonacci Retrace tool from the low close back in February to the recent high close in June we see once again Gold behaving exactly as we expect. The red arrows indicate each place where the Fibonacci Retrace level corresponded to an important Support and Resistance level. Yesterday’s price action bounced off the 50 day MA and the 23.6% Retrace level. Therefore, Gold prices over the short term will most likely continue to rise until we see a break below the 23.6% level or a new high made forms.

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