EUR USD Fibonacci Confluence Should Offer Resistance for Swing Short

EUR USD Fibonacci Confluence Should Offer Resistance for Swing Short

EUR:USD has finally achieved the zone where I’ve been planning a short entry. Unfortunately it has achieved this level with a huge bullish daily candle and therefore unless you are really aggressive I would suggest it’s too early to start jumping into swing shorts just yet.

That said, I am short! I shorted the 76.4% Fibonacci retrace, a level often recognised by EUR:USD and the only pair I use the 76.4% on. So far price has been rejected from this level. Despite that, I expect further tests of this area before price retraces and therefore will probably take profits on my short tonight and re-enter it intraday multiple times snatching a few points here and there until I feel it’s ready to hold onto for a more sustained retrace.

The Fib confluence area combines the 76.4% and 61.8% retraces from 2 separate swing high’s as shown in the chart below.

There is another confluence area which combines with horizontal support in the 1.4030 level. I would therefore be quite confident that 1.4030 will eventually be retested, not sure if the retrace will start here or higher up, but I’m fairly sure a visit back to 1.4030 area will take place.

This chart may look a little messy due to the various annotations including 2 separate Fibonacci areas taken from 2 separate swing highs both combining at the October 2011 swing low, but these are levels that Technical Traders will take note of and once the current Euro Saved Again Euphoria is over with, we can get back to business and make the most out of the swings that await us.

If price climbs beyond the down trend line shown in the chart, then I will scrap the whole retrace idea.

3 Comments
  • ematrader
    Posted at 11:10h, 28 October

    Nice analysis RS and I’m with you in that I would be looking for a swing short on this pair once the “Europe is Saved” euphoria has retreated. A swing high may take a little while to form after yesterdays bullish candle so I shall be on the look out for a 1-2-3- reversal to form before committing and funds. One thing to bare in mind though is this month’s close is likely to form a bullish piercing candlestick pattern so further advances in the months to come cannot be ruled out.

    Quick question. I’ve always used a 78.6% Fibonacci retracement level rather than the 76.4%. I realise that 76.4 is derived by subtracting the 23.6 fib number from 100 (mirror image about 50%) but I was always of the understanding that 78.6 was the true fib number. There’s not a whole lot between the two but I was just wondering if the 76.4% in your fib lines was a default value as provided by your software provider?

  • RS2OOO
    Posted at 17:05h, 28 October

    Funnily enough, when I first talked about taking this trade on the forum, I mentioned the Fib situation and here’s a copy of that post:

    As for 78.6% or 76.4%

    I find the 76.4% the one to use for Euro.

    Different charting packages offered provide one or the other.

    76.4% is a mirror image of the 23.6%

    But, 78.6% is the square root of 61.8% as 127.2% is the square root of 161.8%

    78.6% is the real fibonacci level, but as most packages use 76.4% that has equal effect.

    They are close enough together that they shouldn’t make a difference to stop loss levels.

  • Weekly Swing Trading Round-Up
    Posted at 19:33h, 28 October

    […] EUR:USD remains near the top of my Watchlist for a swing short as detailed here. […]