EURUSD: mind your Fibo’s

EURUSD has been twisting and turning at very technical levels, suggesting the market is very uncertain what to do with the currency pair as we navigate the waters ahead of the EU summit later this week. Here we look at a couple of levels of interest as the range narrows.

Chart: EURUSD
The blue lines demarcating the wave down from the top and then the large throwback rally show that the latter retraced a very precise 61.8% of the down-wave to 1.3032. The following day saw a failed rally attempt above that level before a new sell-off that tested the range support. Then the following rally wave indicated in green topped out on Friday within a few pips of the 61.8% target of 1.2978 (with the 1.30 magnet clearly attracting attempts.) The subsequent sell-off into the overnight Asian session was an almost perfect test of the 61.8% retracement at 1.2890. If we continue with this endless Fibo of Fibo’s, resistance today is supposedly at 1.2950, the 61.8% retracement of the sell-off from Asian’s high – but the range is constricting so quickly that this pattern obviously can’t continue for much longer.

So from here – we’re looking for a break of the consolidation pattern (outlined in thick red lines) that zooms the action out to the bigger picture. A break of the upside and we look for new highs for this cycle (1.3275?) and a break to the downside, and we begin to ponder 1.2700 and then possibly 1.2500.