We have talked of the importance of using Fibonacci retracement levels as a tool to help better gauge potential shifts within the market. Today, we will look at arguably the most popular retracement level, in the form of the 61.8% fibonacci retracement. The 61.8% fib retracement is almost always cited by technicians when looking at a particular move, and as a result, usually generates a lot of attention which translates into some for of a reaction off of this level.
In the above example, we can see that Dollar/Yen is now approaching the 61.8% retrace (101.70) off of the major 110.70-87.15, August08-Jan09 move, and could be looking to roll back over for a resumption of the broader downtrend. If this is the case, selling by 101.70 could prove to be an attractive and compelling trading opportunity.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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