In Forex and Futures Commentary

While I try to keep things simple, this post is all technical. I am asked many questions surrounding these areas all of the time. Below is an attempt to be very specific in regards to ways that I approach these levels – for short term trading, it is one step at a time, and that's what these are initially geared for. When you get this nitty gritty about reference levels it all becomes a matter of observation.  As current price action shifts, oftentimes these levels do, as well.  Reference points only.

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While most analysts are chasing this to the downside, at this point you have to realize that we have come so far, so fast, and there are some massive gaps left behind us.  Be prepared either way.

This market has “been a mess” lately with rumors, seemingly nonsensical speculation, etc., though price tends to get trapped in a range when this happens, as we witnessed over the 7 days leading into this breakout.  EUR/USD can't seem to fight off bad news, thus sellers, these days and overall we have witnessed some stunning “risk-off” periods. The largest items on the macro platter for me right now are:

1: the potential for the market to further price in another 25bps cut off the ECB interest rate in December (EUR negative, and a big one at that)

2: the potential risk of rising bond yields from troubled nations (EUR negative)

3: impulse curveballs thrown by the ECB or European political leaders (either direction)

And here are the levels, and why they were chosen:

Above Current Price, In Order

1.3664 is the local “spike base-ish” resistance zone.  Today's fades from 1.3628 and 1.3652 are NOT uncommon ahead of a spike base. 1.3628 corresponds with appx. 79% of spike base high to price low, and 1.3652 faded right ahead of the spike base, which is usually around 92-93% of the same swing.

1.3715 has a good history behind it and is the spike base on the hourly chart. In the event of any double zero order build-up this will be a decent “confusion zone” for price.  Current touted offers conflict with this a bit, citing 3720-25 as a switchpoint, in line with the nearest resistance to the upside.

1.3770 is just a good area of confluence. It comes in line with approximately 76-79% of this last swing and we've got good history surrounding this level.

1.3870 is a ways away but good former resistance in the form of another spike base that never even got a full shot at filling all orders posted there.

Below Current Price, In Order

Low 1.3520's to 10's fall in line with 76-79% of last leg in the opposite direction (1.3483-1.3652) – if the spike base at 1.3664 gets hit this general area will still likely serve as a strong reference point. Violations of this low without breaching the 1.3664 area and I'm looking beyond the 1.3483 low.

Low 1.3460's down into the 50's cuts “into the base” of the October 7th highs.  Everything else is obvious, though this is a good area where people tend to get thrown off.

1.3410 area pins the approximate origin of the last buying spike from this price area. Bottom of the bucket. This is an approximate zone and at this point and I would wait to be more specific when / if price gets down there.

1.3376 area (not marked below) is a historically strong reactionary level

 

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