Loans and money issues

In addition to the types of support and resistance that are identified by previous price action and thus previous lows and highs, there are also other sorts that focus instead on psychological factors or instead on flow dynamics specific to that particular exchange rate. In the first, market participants frequently focus on round numbers — such as 0.9400 for the Euro–dollar exchange rate — hence such levels are termed psychological support or resistance. They are important not because they represent of necessity a previous low or high, but instead because they reflect the expectation of a future move if they are breached. In the second, there can exist within specific exchange rates support or resistance levels reflecting anticipated flow dynamics. For instance, in the dollar–yen exchange rate, some Japanese exporters may prefer also to sell their receivables forward (selling dollars and buying yen) to achieve a round number. Thus, one anticipates this by adding the forward points. For instance, if the spot dollar–yen exchange rate is 120.45/55 and the three-month forward points are −73/−72.5, one might expect some exporter sales to occur at 120.73 (which would allow an outright level of 120.00 to be achieved). Consequently, one might see 120.73 as one type of resistance. Of course, the difficulty with this particular type of approach is that as the spot exchange rate and the interest rate differential move, so the forward resistance point moves.
A further complication within technical analysis is that there are various ways in which charts can be drawn. In the following section, we look at the three main types:
Line
Candlestick
Bar
The basic chart, which is a simple line chart, is as the title suggests formed from a single line. Of necessity that line must be formed by a series of highs, lows, open or closing levels. Thus, it is an approximation of the price action over a given time, reflecting
more the overall trend rather than the intraday price action. Yet, highs and lows can be just as important as that trend, hence the bar chart is also useful. Sometimes, for the same instrument, security or exchange rate, the line and bar charts can show quite different support and resistance levels. Yet, it can also be important when precisely those highs and lows occurred. For instance, the implication of price action on any given day may be quite different if the high in price action occurs at the start or at the end of a move. For this reason, analysis using a candlestick chart can be useful.
These are the three most basic types of chart. For all three, we can use a number of technical tools and schools of thought to try and develop predictive knowledge from past price patterns. Before we go on to some of the more complex tools, it is probably worth having another look at support and resistance, accompanied by another building block — the moving average. As the name suggests, this is the average of the exchange rate values over a set time period. Because that exchange rate is constantly moving, so is the average rate of necessity. Moving averages can be studied according to periods of any length, but the most widely used and thus most important are the 20-, 55- and 200-day and the 55- and 200-week moving averages. Thus armed with the initial building blocks of support, resistance and moving averages, let’s try to do some technical analysis.
Here, we have our Euro–dollar exchange rate with the following technical tools:
A trend-line
A trend-channel (two parallel trend-lines)
55-day moving average
200-day moving average