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As the global currency markets move into the end of major wave cycles against the Usd the question of timing the reversal and catching the breaks of support and resistance come to the fore. There are so many variables in testing support areas, due to each currency pair and each commodity having its own variables and nuances that impact things, TheLFB Trade Team members said.
The time of day has a lot to do with what will happen at a test of support or resistance. A 4 Hour Chart reveals the volume spikes that must accompany a price break if it is to easily hold. Initially breaking support on low volume can be a false signal, whereas finding support on high volume can normally be trusted to hold the break.
By 12:00 EDT the US session is coming to an end, and as such it is unlikely to get a good read on the strength of the support or resistance breaks, there are few market participants looking to get too involved in the afternoon US Forex Trade. The easiest confirmation of a trend-line, Fibonacci area, or High/Low break is to look at that time to the 30 min Pivot Point chart. Normally if you can get a three fifteen minute candles to hold above a Pivot Point support or resistance area you get confirmation that the market will back the support or resistance move that you have seen elsewhere.
Looking at the commodity that backs each pair to see what price action is coming at the pair’s break-out test will help in determining whether the test of support or resistance will easily hold. Finally, ensure that as many of the other major pairs are running the same way as the break being monitored before deciding to enter.
Real action, and therefore support or resistance breaks, will not start until the Tokyo markets get back from lunch at 22:30 EDT and Chinese and European markets starts to get involved, the Trade Team said. The likely scenario will be that from 11:00 EDT there will be a drift to consolidate the moves from earlier in the day, and break-out’s will not likely hold. Not an easy question to answer, and one that may raise more questions, but the ability to look at all variables at the test of support or resistance does come from decades of watching these things unfold.