Currencies extending their run - will they continue past Fibonacci levels or get tripped up?

Currencies are extending their recent run, as can be seen with the euro and the dollar today. The dollar lost the support levels about 80 and is probing lower. Is it into the abyss? While that remains possible, readers here know that I've also been showing lower levels that it can test without getting that bearish. Those are shown on my charts (below). The $USD monthly chart shows the .618 retracement back to the 70.70 lows, which took place Friday. It's lower again today, so it is too soon to know whether it will exhibit a reversal pattern from poking that Fibonacci level that's often associated with a second-wave pullback.

Same with the euro, as it gets closer today to Fibonacci levels I discussed in this post here - Euro's path out of triangle - or triangle trap - likely to surprise most investors; don't let it hurt your portfolio (5/30/09). Including the $142.60 level that's a 50% retracement back to its highs.

IF the euro is doing a "B" wave retracement, the 50% level is a common level for a "B" wave to reach. And the 143 level is also significant as a Bollinger Band midline level that the euro may test at the same time (see that prior post with the long-term chart showing that).

I don't want to issue any guarantees of course. Just pointing out that there are guideposts for traders to use, so let's use them and focus on whether or not price reacts around them. If there's a reaction, it tells you it's a possible (read: merely possible) reversal area. If there isn't and/or if price continues back in the trend direction - which in this case is obviously up - it tells you the trend remains intact and look for other guideposts in the form of patterns and Fibonacci levels.


As to whether these Fibonacci levels are more probable than not, to trip up these currencies and trigger a trend reversal - I think the likelihood of that has increased. But let's not get complacent. There are other Fibonacci levels, with lower levels of potential support for the dollar and higher levels of potential resistance for the euro. But these ones "should" be the most robust. Getting past these will diminish the chances for these currencies to trend reverse. It's okay for them to spend one day on the "other side" of these Fibonacci levels, because a reversal after that (meaning after today, in this example) can be an effective trend reversal from the Fibonacci level. But lingering around, or starting a reversal only to revisit today's levels again, would be much more dicey.

Note that the $USD charts below are only updated through Friday. The UUP chart updates intraday at Stockcharts.com. You can also check the Dollar Index quote page at Bloomberg during the day (slightly delayed quotes) for current levels of the $USD dollar index during the day.