EURUSD--Tuesday, March 16, 2010
On the following daily chart one can see an impulsive pattern, with a base formed by the low on Dec 22, 2009 and the high of January 13, 2010. A classic Fibonacci target, 2.618 times the distance between these two points would look for completion around 1.3630.
While we have recently traded almost 200 pips beneath that target, a look at the chart shows that what might be called the true impulsive move from the high on January 13 ended around the 2.618 Fibonacci level. Since then we have traded basically sideways, roughly around this level. (A study of price distribution over this period would actually find the central point closer to 1.3600.)
This is even more apparent on an 8 hour chart.
Very often when we see a pattern like this, where an extended Fibonacci target becomes a "center of gravity" for price action rather than an absolute target, it means the chances are high that we will see a continuation of the impulsive move. It is possible that the oversold condition in the EURUSD everyone has been talking about will work itself out during this sideways correction. Certainly the price action seems to indicate more a distribution of profitable short positions rather than a building up of longs. If this is the case, then the next target would be at the 4.236 Fibonacci level, roughly around 1.3050.
