Euro at a Critical Level

Larry Pesavento: ‘The Euro is at a critical level as we come into trading on January 23. As you can see by the hourly chart of the EUR/USD has reached the 0.618 retracement of the longer price swings in the 0.786 retracement of the smaller price swing. Both of these levels come in at the price of 129.80.

Should the Euro exceed the 130 level it would assume that the trend has changed and the Euro is getting ready to rally for longer-term time, which would not be unexpected as the market has been incredibly oversold over the past weeks and months. By using the drawing tools and isolating the price swings, the Fibonacci numbers can be calculated with the Fibonacci retracement tool or use the Pesavento Patterns tool to give exact numbers for where the Euro might react. As always you must use good money management and stop placement to adequately make your risk control the strongest part of your trading model.

The daily chart for the Euro shows several equals moves that are highlighted in pink rectangles. What this is telling you is that the market is at a critical level and is repeating previous price action. This is valuable information as it tells you when the trend is changing, i.e. breaking out of the previous price range.’