Fibonacci levels as movement targets

Interesting historical analogies sometimes arise in the market. The last strong fall of the pound, similar to the fall of the last year, was recorded in 1992. By the way, it also began in August. The pound fell by 6050 points from 2.0110 to 1.4060. At first, the pound rapidly plummeted below the 100-weeks average (yellow in Fig.1) to 1.6815, then it corrected to this average by more than 1000 pips to 1.8050, and then continued falling. That means that the pair broke through the strong level at once, corrected to it and then continued falling down from it, like from the resistance.

The goals of the market movement are often Fibo levels 123.6%, 150% и 161.8% от первого роста или падения. Если «натянуть» сетку Фибо, приняв за 100% первое падение 2.0110-1.6815, то получим следующие уровни: 123.6% — 1.6040, 150% — 1.5175, 161.8% — 1.4775. Тогда уровень 123.6% был пробит сходу, уровень 150% выступил локальной поддержкой, от которой цена опять скорректировалась и упала ниже уровня 161.8% до минимума на 1.4060. То есть, при высокой волатильности во время обвального падения эти уровни работали плохо. Но самое интересное началось потом.

In the spring of 1993 there was a strong correction and it ended at the level of 123.6% from the fall and the 50-week average. This point is marked with a blue arrow on the chart. The fall continued. First, the price fell to the 150% Fibo level at 1.5175, and then to 161.8% Fibo at 1.4775. The low was 1.4640. And a months-long consolidation began near that level. The level of 1.4775, of course, was broken through by tails, but each time it was false. It was broken at the maximum by 225 points. On the daily chart, I have counted 14 significant bounces from or under that level. The red arrows in Figure 1.

The 150% Fibo level at 1.5175 was a frequent resistance. This consolidation ended with the formation of a reversal triangle, which finally broke through upwards, and a strong rally began. Where did it go? It is easy to guess three times. It reached the level of 123.6%. Of course, it was also broken through at the beginning, but it did not go too far and again began a consolidation that lasted for many months. resistance at least seven times. As a result, the price slid again to the same levels 150% and 161.8% (almost didn't reach the last one). And the next growth started from under 150%. Where to this time? To the level of 100% Fibo. And the multi-month consolidation started at this level as well.

Fig. 1. Weekly chart of GBPUSD. Operation of the Fibo grid.

Выводы следующие. После сильного обвала рынок много лет находился в состоянии относительной диапазонной торговли, где уровни 100, 123.6, 150 и 161.8% от первого падения очень часто выступали локальными поддержками или сопротивлениями. И главное здесь — это уровни. Мы не знаем, повториться ли история с диапазоном, или может структурный кризис заставит рынок продолжить обвальное падение, или, наоборот, начнется сильный рост, но подобные уровни уже начали работать.

Fig. 2. The current state of the GBPUSD pair and its Fibo levels.

В прошлом году фунт завалился на 6600 пунктов от уровня 2.0150 до 1.3500. Первое падение было до уровня 1.7445, откуда состоялась коррекция до 50-недельной средней. До 100-недельной фунт на этот раз не дошел, но коррекция составила те же 1210 пунктов. В 1992-м было 1225. Натягиваю сетку Фибо на эту волну и получаю уровни 123.6% — 1.6800, 150% — 1.6090 и 161.8% — 1.5770. Эти уровни тоже выступали локальными поддержками и resistances in the process of falling last year. But the market also fell below the level of 161.8%. There was a strong correction this spring. It was much stronger than the 1993 correction, when the market was up 23% from the fall. Now the market corrected by 50% from the fall, but most interestingly, the level of 123.6% was broken only by the tail and turned down. This time, 50% and 123.6% coincided around 1.6800. And the high was at 1.7040, at the 100-week average.

Fig. 3. The current state of the GBPUSD pair and its Fibo levels. Approximation.

From the level of 123.6% the pound descended to 150% at 1.6090. The low was at 1.6112. It rebounded up to the level of 123.6 (did not reach the 50-point level) and fell back, but now to the level of 161.8% at 1.5770. It might bounce up from here. If history repeats, the pound might have a consolidation here, between 161.8% at 1.5770 and 150% at 1.6090 or a little bit higher. The 50-day average might be the resistance. So far, history has repeated itself and the levels worked. Let's see how the market decides next.