Technical Analysis EUR/USD: When to Buy in a Corrective Drop

EUR/USD is trading below 1.30 today further extending the corrective drop since the 4-month high at 1.3175. After successfully predicting the currency pair’s retracement, the question now is when to buy back the sold euros, or when to enter long again. Support and resistance levels can provide the most obvious answer, although hidden support and resistance levels pointed out by Fibonacci retracement line may also help forex traders pinpoint the best entry points. In other words, we are getting prepared with the help of technical analysis when forex news ends the drop!

Support and Resistance level in daily forex graph


The most clear resistance level that failed recently was the one at 1.2750. EUR/USD had found support during the decline in June, before dropping to the lowest low at 1.2042. Given the downtrend ended and reversed since then, traders would have expected the new established uptrend to meet resistance at 1.2750. On the contrary the currency pair penetrated that level in a single day (September 7) and quickly verified the uptrend’s support level on the next candlestick (Monday, September 10). Here’s the 30min forex graph of that period.


Fibonacci Retracement Levels

Let’s go back to the daily EUR/USD graph and plot the Fibonacci retracement levels. Well, what do we have here?! The key 61.8% Fibonacci retracement level coincides with the already discussed support level at 1.2750! Maybe it doesn’t line up to that exact number (1.2738) but it’s a great indication of the importance of that level! Even the other crucial Fibonacci level (38.2%) also aligns with another key support level (1.247).


We now have 3 reasons to buy EUR/USD if it retraces to 1.2750:

1)      Previous resistance – now support level.

2)      61.8% Fibonacci level.

3)      Round number!

Do you also use technical analysis in forex trading? Have Fibonacci retracement levels helped you in currency trading? Let me know in the comments below!