Pure Guesswork

Last night we broke through a key Fibonacci support level around 1.3730. The break has not been that drastic (so far) and if we manage to close the week out above it, we could see this level come into play as genuine support. This happened in late December when the EURUSD broke below a support level around 1.4260 but then recovered and held that level for about 3 weeks.

These Fibonacci levels derive from the internals of what was a long term impulsive move from late March of 2009 to the highs in late November of that year. This enitre move can be seen as the third wave of a classic 3 wave correction of the fall in the EURUSD in the 2nd half of 2008.

Concentrating on the last or "C" wave, we see an initial base built, with a high at 1.3737 in March of last year and a subsequent pullback to 1.2884 in late April. Using that base as a measure we could project an impulsive move which would equal 2.618 times the length of the pullback from 1.3737 to 1.2884. That target was 1.5117.

We surpassed that level by a few pips (approximately 30) in intraday trading, but we never had a weekly close above it (in fact, we never managed to have a weekly close above 1.50).

Looking at that last impulsive pattern (rather than the entire move from October 2008 low to November 2009 hight), we find on a daily chart that support in this current downturn has come at internal Fibonacci levels of that impulsive pattern.

Seen in greater detail on an 8 hour chart:

And on a 4 hour chart:

I believe that if today's adventures lead to a recovery above that area around 1.3730 we could see that level come into play as (at least temporary) support, much as happend at the 1.4260 level back in late December of 2009. We tried about an hour ago and failed. Very likely the market will try again.