Jeff's Forex Market Notes - January 11th, 2009

Notes - January 11th, 2009
Yesterday brought to a close another good week for the Forex Trade Kings Club and myself. We have enjoyed 5 weeks now with our weekly targets being met and we expect this to continue. The more volatility there is in the markets the more we like it.

This past week the Euro has fell to test the previous support left by natural support and resistance points. Initially this point has held in the 1.3300 range a second test here and we could see a failure this next time around. Looking at this movement of the Euro over the past week since the initial test of 1.3300 (figure 1) and the events that unfolded from that point.

Figure 1


A bounce ensues from the test of 1.3300 level, actually a low of 1.3312. Using Fibonacci as a gauge of the balance between a long and short market this point is also the last line of defense before moving into the short side indicated by (Figure 2). The support levels generated from this last retracement into the downtrend has price penetrating deep into its levels. The subsequent bounce from the low of 1.3312 and price as of yet could not break back into the long side of the market based on the this last retracement.

Figure 2


If we we're to look even closer now at the movements after the bounce from 1.3312 on the 4 hour chart, the natural resistance would have started being felt once price reached the 1.3825 range, but as we can see fell just shy of this before the sell off during Fridays movement.

Figure 3


Now if we were to take the viewpoint from Fibonacci to find the resistance to this bounce from 1.3312 we simply measure the last wave down and find our resistance to the bounce.

Figure 4


The thing to have been looking for Friday was to enter once the market begins to trade lower off the Natural resistance points and the levels indicated by the use of Fibonacci. Since price began to move down the question becomes, will support hold or will it fail so you simply identify the support now as price moves down from the rejection point in the 1.3825 range.

Figure 5


If we look at this even closer now for an entry into the market, it's as soon as we see it trading lower or a break of previous support. Targeting the previous lows since it’s a Friday and we don’t want to hold on to a trade over the weekend during these type market conditions. Friday was an NFP day and we wouldn’t want to enter too soon when the spreads are high, but wait until the spreads are normal and either a support or resistance point gets broken.

Figure 6


The point is the markets are all about Support and Resistance, Supply and Demand. To trade it you just need to understand how this works and the price action or reaction created by S&R. The rest will fall into place.

Have a profitable week - Jeff.

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