Technical Analysis In Forex Markets

Technical analysis includes support and resistance levels where currency pairs tend to find lows and highs. At the same time, price momentum indicators often signal where exchange rates are running out of steam on the up and the downside. Technical analysis can breakdown at times when black swan events occur.

Technical analysts look for areas of price support and resistance on charts. Support is a price on the downside where a market tends to find buying that prevents the price from falling further. Resistance is just the opposite, as it is the price on the upside where a market tends to experience selling that prevents it from rising further. When a price moves below support or above resistance, it often signals a reversal in a bullish or bearish price trend.

Technical analysis provides a roadmap of the past in the quest for insight into the future. Many market participants use technical analysis to make trading and investing decisions, which often creates a self-fulfilling prophecy as a herd of transactional activity can create or impede a price trend. Technical analysis is a tool that foreign exchange traders use to project the path of least resistance of exchange rates.