The CME Euro June contract reached the daily target extension at 1.3150 yesterday and is currently holding above that level:

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If the decline continues, the support level at 1.3106 is key. A close below that level would open the door to significant new lows in the 1.190 area. This combination of daily target and a key .786 support level makes this zone an area for at least a corrective bounce and even a possible recovery. You can see the strong resistance zone above. It’s rather wide, from 1.3478 to 1.3571, but it represents the degree of prior bounces every time a new daily low has been established, so we’d expect this zone to hold if the decline is going to continue. That’s if there is indeed a protracted bounce. While Fibonacci allows us to identify the area that should hold if the longer term decline is going to continue, it also helps us to identify a shorter term decision area which may hold first on the intraday charts if this is indeed just a minor corrective bounce.

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The timing resistance identified on this 60 minute chart is derived by counting the number of bars in prior corrective rallies and multiplying by key Fibonacci ratios. Those bar counts are then projected from the lowest low on the chart. A confluence of these ratios shows that there’s a strong timing resistance zone coming up midsession today. If we’re rallying at that point and the downside pattern is going to continue? We’d expect to see price failure during that timing zone. If there’s more upside potential this will continue to rally through this timing zone, thereby disrupting the pattern of short term bounces holding resistance and bringing new swing lows. 1.3309 is the target extension derived by taking the last swing into the low and multiplying by the key Fibonacci ratio of 1.272. Often the target extensions of the last swing into a low or high serve as the point of termination of a corrective move. Beyond that point, the next significant resistance levels are in bold.

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