Fibonacci Trading - Page 17

Gregory McLeod · #**241** (**permalink**) 04-02-2008, 03:50 PM

Quote:

Originally Posted by Gregory McLeod

With the DOW up nearly 400 points on the day, risk aversion seems to have abated as carry trade currencies like the AUD/JPY have gained favor.

The rush to sell yen in favor of high yielding assets could continue for a few days to come.

If AUD/JPY gets above 92.58, we could see the 127% extension target hit at 93.79. I would expect gains to be capped at the 94.53 area which is where the 200 period moving average is located.

We could see prices sell off violently form the 93.87-94.53 area back down to retest the 88.000 area.

See the attached chart.

I welcome any comments or questions on this or other pairs you might be interested in discussing.

Happy Trading,

Gregory McLeod
FX Powercourse Instructor

Our AUD/JPY trade hit the 127% extension target. It ended the US Session with a long-legged doji. This indecision candle could open up further gains to the 161.8% extension target of 95.33.

See the attached chart:

Gregory McLeod · #**242** (**permalink**) 04-02-2008, 05:00 PM

After the Bears were rejected at the 7869 level, EUR/GBP bulls have been empowered to push prices higher. A close above the .7898 level will open up the 127% extension target of .7910 and the 161.8% extension target of .7927.

I usually like looking at longer term charts as they provide more profit potential.

This chart illustrates how Fibonacci price extensions can be used on shorter time frames like the 30 minute chart.

See the attached chart:

~Greg

Gregory McLeod · #**243** (**permalink**) 04-02-2008, 06:50 PM

After a 3 day decline from a multi-week high of 2.0177 on March 31st to a low of 1.9691 on April 2nd, EURNZD found strong support at the 38.2% Fibonacci retracement. Good buying at this level at a break of the 1.9901 level should open up the 2.000 and 2.0100 area. A stop could be placed at the 19684 area just below the wick of the pseudo-hammer with a target of at least double the stop; this would be considered good money management. In addition, cost of the stop in terms of pips should never exceed 5% of your total account equity. Professional traders preserve capital first before entering a trade.

See the attached chart.

Gregory McLeod · #**244** (**permalink**) 04-03-2008, 02:55 PM

Quote:

Originally Posted by Gregory McLeod

After the Bears were rejected at the 7869 level, EUR/GBP bulls have been empowered to push prices higher. A close above the .7898 level will open up the 127% extension target of .7910 and the 161.8% extension target of .7927.

I usually like looking at longer term charts as they provide more profit potential.

This chart illustrates how Fibonacci price extensions can be used on shorter time frames like the 30 minute chart.

See the attached chart:

~Greg

EUR/GBP spiked within 3 pips of the 127% extension target before selling off dramatically. Disappointing Eurozone retail sales that came in at -.5% vs. .2% expected seems to be the factor in EURO weakness across several pairs.

See the attached chart.

Gregory McLeod · #**245** (**permalink**) 04-04-2008, 11:09 AM

Quote:

Originally Posted by Gregory McLeod

After a 3 day decline from a multi-week high of 2.0177 on March 31st to a low of 1.9691 on April 2nd, EURNZD found strong support at the 38.2% Fibonacci retracement. Good buying at this level at a break of the 1.9901 level should open up the 2.000 and 2.0100 area. A stop could be placed at the 19684 area just below the wick of the pseudo-hammer with a target of at least double the stop; this would be considered good money management. In addition, cost of the stop in terms of pips should never exceed 5% of your total account equity. Professional traders preserve capital first before entering a trade.

See the attached chart.

This is a follow up to the trade set up on the EUR/NZD posted on April 2nd. Where price bounced up strongly from a 38.2 fibonacci extension of the swing from 1.8962 to 2.0179. An entry BUY placed a few pips above the 1.9900 area with a stop placed below the 38.2% Fibo support with a Limit placed in the 2.0100 area.

The risk reward was not that great at .85:1 ( risking 200 pips to make 170. We usually want to look for a minimum reward to risk of 2:1.

We came out a winner on this particular trade. However a series of losers with this same risk to reward ratio would soon make it difficult make a comeback.

This trade showed a good technical set up. But remember, not all good technical set ups are "good" in terms of money management; this is the paradox.

Gregory McLeod · #**246** (**permalink**) 04-05-2008, 12:11 AM

The US dollar looks poised to retest and take out the March 16th low of 95.71 after a further weakeness in the US economy as indicated by Friday's NFP report.

Japanese traders were on holiday Friday, so look for them to join in the global chorus to sell the dollar.

The March 4th 104.16 swing high to the 3/16/08 low has been followed by a counter trend rally to the 103.00 area. Price has stalled and failed to push past the 103.00 resistance area. This is the 78.6% retracement of the down swing.

Failure to press higher opens the door wide open for dollar bears to push USD/JPY past the 3/16/08 low of 95.71 and to 93.36 the 127% extension target of the down swing. Stops placed around the 103 area with Limit in the 93.36 target zone would create a 5.8:1 reward to risk ratio for this trade.

To learn more on trading with Fibonacci as well as other computer backtested strategies, enroll in one of our advanced trading courses:
http://www.fxcm.com/fxcourse-portal.jsp

Gregory McLeod · #**247** (**permalink**) 04-08-2008, 09:29 PM

GBP/CHF attempted to stage a rally from the 1.9889 area only to be rejected by sellers at the 2.000 handle which is the 38.2% fibonacci level of the 2.0191-1.9889 swing.

Prices look to be headed to the 1.9800 area. A resurgence of risk aversion ahead of Fridays G-7 meeting of central bankers in Washington D.C.

Traders will look for any mention of intervention to prop up the dollar.

Ilya Spivak · #**248** (**permalink**) 04-09-2008, 01:16 AM

EURUSD began last week range-bound between the highest close of the previous bullish run near 1.5730 and the 1.5900 double top. Markets reacted strongly to the marginally better ISM manufacturing survey, giving the Greenback impetus to rally and take the pair down to the upward-sloping trend line established in early February. Last Friday’s NFP report crushed the dollar bulls’ wishful thinking, and further downside failed to materialize. Current price action is very reminiscent of February’s orderly ascent along the trend line, with consistent bullish days separated by shallow bearish Hammer candlesticks. We continue to hold the view that EURUSD is set to test 1.6000.

Ilya Spivak · #**249** (**permalink**) 04-09-2008, 01:17 AM

We remained flat on sterling last week as we looked for the pair to show a confirmation of directional bias. The current picture looks decidedly bearish, with a downward-sloping resistance trend line capping recent upside retracements. The strongest support looks to be the 61.8% Fibonacci retracement of the 02/20-03/13 rally at 1.9758. Price action has repeatedly bounced higher from this level, working through preceding Fib levels at 2.0002 and 1.9880, setting a lower high and with every try. In the near term, we expect the pair to test this level again with a potential break targeting as low as 1.9360.

Ilya Spivak · #**250** (**permalink**) 04-09-2008, 01:18 AM

Bucking negative sentiment towards the dollar following last Friday’s NFP, USDJPY broke out of the range between 100.70 and 98.50 to extend above multi-year support-turned resistance at 101.50. The level has only been tested twice prior to this year, once in 1999 and again in 2005. On both previous occasions, the test sparked a protracted multi-year rally. The level gave way March as USDJPY pushed to a low of 95.71. Last week’s trading established the pivotal level as support once again, with USDJPY consolidating below the 38.2% Fib of the 12/27/07-03/17 decline at 102.89. Our bias has shifted to bullish, seeing USDJPY break through current resistance to test the 50% Fib at 105.15.

Ilya Spivak · #**251** (**permalink**) 04-09-2008, 01:18 AM

The move below 0.9840 did not materialize last week. Rather, USDCHF continues to oscillate between the 38.2% Fibonacci retracement of the 02/14-03/17 decline at 1.0196 and the record-lowest close at 0.9840. With no substantial evidence to change our stance, we remain bearish looking for a return to the current range’s lows.

Ilya Spivak · #**252** (**permalink**) 04-09-2008, 01:20 AM

Last week’s bearish bias proved correct, though the decline was not as deep as we anticipated. USDCAD was rejected once again from the top of the long-term 0.9793-1.0250 range (established in August of last year) and declined to the 50% Fibonacci retracement of the 01/22-02/28 down leg at 1.0041. We now notice an upward-sloping trend line connecting recent lows and adding further support near the 50% Fib level. USDCAD rallied from this area above the 61.8% retracement at 1.0120 to find itself in at the bottom of a familiar range, the very same one it had occupied since 03/20. From here, it seems trading will move up to once again find itself at the larger range’s upper boundary.

Ilya Spivak · #**253** (**permalink**) 04-09-2008, 01:20 AM

Having bounced from support at the long-term trend line established on 08/17/07 as of the writing of last week’s report, AUDUSD returned to that support having failed to build momentum through Fibonacci resistance levels at 0.9157 and 0.9222 (38.2% and 50% of the 02/29-03/20 decline, respectively). On a second bounce from the trend line, AUDUSD overcame the aforementioned hurdles and is now testing the 61.8% Fib level at 0.9287. Should this resistance give way, we see the pair rallying back to test 0.9500. On balance, we may see yet another retracement to support before this Fib gives in. Regardless, our bias continues to favor the upside.

Ilya Spivak · #**254** (**permalink**) 04-09-2008, 01:21 AM

Last week’s bearish bias proved short-lived. While NZDUSD declined past the 38.2% Fibonacci retracement of the 01/22-02/27 rally at 0.7902, the decline was halted at the intersection of the 50% Fib level at 0.7804 and the upward-sloping trend line established in September of last year. Spending a bit of time ranging between the nearest retracement levels, the pair mounted a top-side brake as USD optimism waned and risk appetite returned to the market. This places NZDUSD between the boundaries of last month’s range between 0.7902 and 0.8217. In the near term, we see the pair oscillating upwards to test the 0.8100 level.

Gregory McLeod · #**255** (**permalink**) 04-09-2008, 05:57 PM

Quote:

Originally Posted by Gregory McLeod

GBP/CHF attempted to stage a rally from the 1.9889 area only to be rejected by sellers at the 2.000 handle which is the 38.2% fibonacci level of the 2.0191-1.9889 swing.

Prices look to be headed to the 1.9800 area. A resurgence of risk aversion ahead of Fridays G-7 meeting of central bankers in Washington D.C.

Traders will look for any mention of intervention to prop up the dollar.

GBP/CHF continues to plod lower exceeding our target of 1.9800 down to a low of 1.9721 before retracing to the 1.9777-89 area. This represents a 23.6 Fibonacci retracement of the 2.000 to 1.9721 down swing on 4/8-4/9.

Further losses are expected to the 1.9699, 1.9644 and the 161.8% ext. target of 1.9544 is possible.

See the attached chart.

To learn more about using Fibonacci and other trading techniques, enroll in one of our trading courses: http://www.fxcm.com/fxcourse-portal.jsp

Greg