(Note from Rob: this post was written by guest contributor Maxwell Fox.)
With all of this volatility across all markets and asset classes, it becomes easy to feel overwhelmed and not know what to do next, or even what to look for next. When prices get so buck wild, it is usually a helpful practice to “back up” and take a wider look at the market. If you are usually fixed on the 15 or 60 minute charts, then take a while to look at the 4 hour, daily and weekly charts. Just breathe deep, cool your jets and reset your perspective – you might like what you see on these longer term charts.
Let’s start with the EURUSD Weekly chart:
This is amonster head and shoulders pattern. Icall it a two headed monster because of its enormity and the double top around1.60. The important things to watch hereare:
· Support
o The“collarbone” support at 1.3880.
o Closesbelow 1.3880, eyes should be on the 1.3350 area.
o Below1.3350, little technical support can be found until the mid-upper 1.20’s.
· Resistance
o Ourshoulder level of the 1.4880 area should provide a ceiling target for anystrong rally that may arise. I know itis a relatively huge range, but with the volatility we’ve had recently, thechart doesn’t give us much else to work with.
o Above1.4880, we would need to watch out for the 1.55 area.
o Beyond1.55, it would become likely to see some further all time highs beingmade.
Now a look atthe GBPUSD Weekly:
Our recent low around 1.7440 will be in the spotlight in thenear term. Closes below this level wouldsignal further weakness in the pair.
· Support
o Recent low 1.7440
o Closes below that would set sights on the 1.7050area.
o Continuing lower, you could look for someresurrection of some ancient levels like the 1.6575 and 1.6175.
Resistance
o 1.81, but this might prove weak.
o 1.8670 is our recent top, and should be thetarget of focus for any strong rallies.
o 1.93 would be in view if we got closes above1.8670
Now, this is just a quick look at a longer termchart. The imprtant thing to rememberwhen you lose all framework on shorter term charts, is to step back and look atthings in a longer term context. Alsoremember, high volatility leads to low volatility. This type of action may continue for a shortwhile, but expect things to eventually settle down, and daily ranges shouldshrink back to “normal”.