This is the same chart that I have been posting for the second half of last year. It simply displays the zones created by drawing fibs from key highs and lows of the market and creating a box between the 50 and 61.8 areas. When the zone is created from a low to high, then it is considered a support area and colored green. When it is created from a high to low, the zone is considered a resistance zone and colored red. The taller the zone, the bigger the move that created it, and in theory the larger the support or resistance. Also, the bigger the zone, the bigger the money interested in either pushing through or holding.
At this point it seems that minor support zones have been holding fairly well since March of last year while some minor resistance zones have failed. The major support zone created between 1.2678 and 1.2875 was able to hold three times last year in March, May, and July. The last support zone rejection created the current up move from the July 1.2754 low up to the December 1.3892 high. However this move has had difficulty breaking above the top are of the resistance zone between 1.3490 and 1.3832. Even the break in July above 1.3832 produced a 146 pip rejection in the same day it reached the high. Though it was created in relatively lower volume conditions, it was enough to bring price back into the resistance zone.
What I will be watching next week
Candles for the 9th and 10th of January are showing bullish momentum off of a minor support zone between 1.3524 and 1.3595 and seem set on a collision course with the resistance zone set between 1.3720 and 1.3758. I will be watching price action at those levels. If price breaks through the minor resistance zone, I would expect a challenge of the 1.3832 upper boundary of the major resistance zone and a possible challenge of the high created on 27 of December around 1.3890’s. Being that 1.3900 is a big number at or near the upper boundary of a strong resistance zone, I would expect some sort of momentum slowdown at that point. The absence of a momentum slowdown will make the long side interesting. Though as always caution reigns because there is an even larger resistance zone above with lower boundary at 1.3956 and upper boundary at 1.4448.
On the other hand, a nice rejection off of the minor resistance zone at 1.3720 and 1.3758 would set up a test of the previous support zone and low of the month at 1.3547. I would be more excited about the prospects of a short move than a long move. To the top there is the larger resistance zone mentioned earlier. The the bottom there is a little more room before hitting any major support zones. A break down of the minor support zone could be a precursor to a breakdown of the larger up trend move in effect since July of last year.
For you scalpers out there, on the way up, 1.3750 ought to be a good place to scalp some pips to the short side. Use your own judgement of course.
These observations do not take into account any black swan situations of course. Keep an eye out for news around these levels.
Be careful out there. Many happy pips.