It was a week with strong moves on major pairs (move down from top almost 400 pips on eur/usd). All thanks to the ECB’s President, Mario Draghi, who said that the Central Bank is willing to review the amount of money designated to bond purchases. And euro tanked hard. I want to show you some technical background from this week, which was helpful to take right direction.
Before we move to Fibonacci tools, first weekly pivot points. In the start of the week buyers tried to breakout higher, but 100 and 200 simple moving averages stopped them. Also the whole action was taking place below weekly pivot point. For me it was a clear sign that long positions are not in the game until bulls will break above that pivot line. But in the end, sellers took initiative. 1 hour eur/usd:
Move down was strong and rapid, but as I wrote many times before, Fibonacci still worked great. Actually, this was a rare occasion on longer time frame, when price went down to the 261.8% Fibonacci extension. 4 hour eur/usd with weekly pivot points:
But how to trade situations like this? It depends from your preferred time frames. In my case I kept one tab open with longer time frame and longer Fibo lines (it was 4 hour chart with weekly pivot points and Fibo lines for main ABC move). I prefer to trade on lower time frames so I had another tabs (5 mins, 15min) with daily pivots and I hunted there for trade with Fibo tools. So thanks to the longer term view I knew where possible support/resistance lines were.
If we are talking about eur/usd, let’s have some quick look at longer frames. Eur/usd stopped for now at monthly S1 line, so there is a possibility that bulls will try to protect this support. Daily eur/usd with monthly pivots:
But as I look at weekly eur/usd Ichimoku, you can see that price broke down from cloud. This is a good sell signal, but price did not brake much below that green trend line. Weekly eur/usd with Ichimoku:
To sum up. Eur/usd is still in place where bulls may try to buy (monthly S1 line, at trend line on weekly) and we can see correction up. But the larger picture and comments from Draghi favors a short side.