Fibonacci retracement on the EUR/USD

Despite an unsettled Eurozone, the EUR/USD has moved in a straight line from 1.1874, which traded at the height of the crisis in June of this year, all the way up over 1.40 last week. As a technician, I am conscious that this current level is a 61.8% Fibonacci retracement from the 2009 high to the 2010 low, which may precipitate in stern resistance. With hints of renewed woes in Europe, spurred by the recent Moody review of the Irish bond market with potential downgrades possible, current high levels in the Euro would present an opportunity for capitalising on the re-emergence of euro weakness.
Admittedly the rally has been spurred not just by euro strength but also dollar weakness and I certainly remember when we were trading down on the lows below 1.20 that people were talking about ‘par’ trading soon. Most of the market were probably short at that point, and are most likely closed out by now, paving the way for retracement back from this key Fibonacci retracement level; possibly even making new lows should there be a double dip in the euro sovereign debt crisis.

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About Simon Brown
Simon Brown has over 20 years experience trading Derivatives on everything from Gold, FTSE to Dollar/Pound. Simon has lectured in Trading Psychology, Strategy and Technical Analysis, in addition to regular appearances on CNBC television. He is now Managing Director of ProSpreads.

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