EUR/USD: Weekly Tips and Tools/Chart for 17-21 of October, 2011
R3 and S3 are good indication for the maximum range for extremely volatile days but can exceeded occasionally.
Pivot lines work well in sideways markets as prices will most likely range between the R1 and S1 line.
In a strong trend, price will be low through a pivot point line and keep going.
If there is significant news to influence the market price may go straight through R1 or S1 and reach even R2 & R3 or S2 & S3.
Time Frame: H1
Drag your Fibonacci retracement levels from the lower to the higher of the last week (10 - 14 of October, 2011) in order to determine low and high price.
Average = (Higher - Lower) / 2
Average = 1.3635
50% Fibonacci retracement levels has already formed a strong level at 1.3635.
Variation = Average * (Higher - Lower)
If the strength of the trend for pair is an uptrend, then the strength of the currency: EUR is an uptrend and USD is a downtrend.
Most of traders use the Fibonacci retracement to determine accurate psychology level of support and resistance.
PP: Pivot Point.