EUR/USD: The World is Flat, Escape To Safe Haven

By: Andrei Tratseuski

The risk aversion rally is pushing the Euro downwards. A potential slowdown in the Chinese markets is having a contagion affect on the higher yielding currencies. Weak data in China rattled throughout the Asian markets which than proliferated into weakness in Europe and the U.S. Markets. “The world is flat” as some would say. This year was nothing less than a proof of that statement. Troubles in Europe spill weakness in other markets. Fears in China now spill into weakness globally. Hong Kong stock market dropping to a 14-month low translates into weakness in the U.S. Equities. It's funny that the world is so interconnected. Nonetheless, this makes it easier for traders as it is easy to interpret the information. Once something horrid happens in one type of market the contagion affect will push other markets downward as well. This leaves less room for guessing and more room for action. A proactive strategy is ideal to use in this type of markets.

Looking at the EUR/USD we try to interpret the given information and possible figure where we may see a congestion or a turnaround. Looking at our ABCD/Fibonacci Extension strategy we see a valuable level of support at 1.2330-1.2340. AB line will equal to CD line. So we extend a line from point A to point B, duplicate it and put it to point C extending to point D. Looking at the Fibonacci extensions we find that AB extension of 127.1% falls on the same level as CD line. The following gives us our solid point of support. If the level is Broken we will look for 1.2040 to act as support for the upcoming days as it represents 161.8% extension of AB line.