October 31, 2009

Fibonacci In Action - EUR/USD And Gold

The various different fibonacci levels are generally very useful, particularly when you are trading the long-term daily charts. To demonstrate this point I suggest you look at the daily chart of both gold and the EUR/USD currency pair because the price bounced nicely off some key fibonacci levels this week.

If you watch this short trading video, you can see that gold fell quite sharply this week but soon moved back upwards again after it touched the 50% retracement level, and you will also see that the EUR/USD pair fell to around the 1.47 level before staging a recovery, which interestingly enough was exactly where the 61.8% retracement level was.

So the point is that these fibonacci levels are worth watching not because of any mystical powers they may have, but because of how the markets react when these key levels are reached. The 50% and 61.8% retracement levels, in particular, often act as turning points, as demonstrated in these two examples.



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