One of the most closely-followed, yet least-understood, aspects of the financial markets is the use of technical indicators. This type of analysis uses historical data and chart patterns to try to predict future price movements. While it has long been used among professional traders, more and more novice investors are diving into this field as well.
In the markets, Fibonacci Pivots are one of the most popular technical indicators. This tool identifies the potential support and resistance levels in the market, telling traders when prices may struggle or soar. Understanding Fibonacci Pivots can be the key to successful trading in some of the most liquid and heavily traded asset classes.
In this article, we look to explore the secrets behind Fibonacci Pivots, using the US Dollar ETF, SP500 Index and the Euro as examples. The US Dollar ETF is one of the most widely traded currency-focused products around. And of course, the SP500 Index is one of the most closely followed gauges of the US Equity Market. We also focus on the Euro – Europe’s single currency – to get an idea on how these tools can be used in other exchange rates.
What are Fibonacci Pivots?
Fibonacci Pivots are technical indicators used to identify potential levels of support and resistance. These levels are derived from the Fibonacci Sequence – and are typically observed at certain levels of price movement. When applied to price charts, they indicate points where prices could struggle to go higher or lower.
In the US Dollar ETF, the Fibonacci Pivots are most often used to identify key levels of support and resistance in the currency pair. For instance, traders may notice that prices of the ETF are struggling to go higher or lower when they reach one of the Fibonacci Pivots. This tells the trader that the market may be ready to either reverse direction or remain range-bound.
When it comes to the SP500 Index, Fibonacci Pivots can be used to determine where the index may find support or resistance. For instance, if the Index is reaching one of the Fibonacci Pivots, this may suggest that the market is in need of a move either up or down – or that it may remain range-bound.
Finally, Fibonacci Pivots can also be applied to the Euro exchange rate. Here, traders may watch to see if the Euro is struggling to go higher or lower when it reaches a certain Fibonacci level. This along with other technical indicators may be used to predict if the Euro will remain range-bound or make a move downwards or upwards.
Conclusion
Understanding Fibonacci Pivots is key to successful trading in some of the most heavily traded asset classes out there. Whether it’s the US Dollar ETF, SP500 Index, or Exchange rates, traders may use this tool to identify levels of support and resistance – and to predict price movements in the future. While there are no guarantees when it comes to trading, mastering the use of Fibonacci Pivots can be incredibly informative and rewarding.