In today’s difficult and especially unpredictable trading environment, one of the best tools to help you find exit and entry signals might incorporate a practical Fibonacci retracement strategy in conjunction with other widely used technical indicators such as support and resistance levels, MACD and momentum indicators such as RSI.

Fibonacci retracement works well using MACD because the parameters of market swings can be pre-set with the moment indicator (MACD) confirming a reversal in the trend.

Take for example the USD/JPY chart below:

USDJPY

Around mid-April the price bottoms out and bounces up from the long-term upwards trending support line. The price stabilises and the MACD indicator produces an upward cross. The combination of these important signals might convince a trader to jump in long at the first green arrow.

As the price moves up with momentum, it becomes clear that the limits of the short-term range are in place and Fibonacci lines can be drawn over the chart.

The first challenge to the upwards price momentum occurs at the first blue cross set at the 0.618 Fibonacci level. A trader might plausibly argue that the move has run its course and can go no further than the long term downwards trending resistance line. However, the MACD indicator says otherwise and signals the US dollar still has legs. In this case, indicators working hand in hand, we can see that a correct exit sign has yet to be produced and a wiser trader would hold the position.

The price then breaks out up past resistance and hits the 0.718 Fibonacci level where it stalls. This is the level before the currency fully retraces and presents a formidable trial.  At this point momentum and MACD starts to stabilise. The price falls slides below a minor support line and the MACD throws up a downwards cross.

CombiningFibonacci, MACD and resistance/support we obtain a solid exit point, which is also ashort entry signal indicated by the second green arrow. The wise trader then swaps the buy position for a sell.

Finally, as the price heavily drops back into the long-term triangulating range it immediately bounces up to hit the long term downwards trending resistance line indicated by the second blue cross and the 0.50 Fibonacci level. The calm trader would hold the short position as the MACD indicator foretells further selling pressure. After a couple of days, the price continues its journey south towards the upwards support line which is another exit (and potentially entry) signal indicated by the third green arrow. If the MACD crosses over at this point, it would then confirm the swing.

The Fibonacci Retracements at 23.6%, 38.2%, 50% and 61.8% stem from ratios found within the Fibonacci sequence. The 50% retracement is not based on a Fibonacci number. Instead, this number stems from Dow Theory's assertion that the Averages often retrace half their prior move and represents an important level.

Fibonacci works well with momentum indicators such as the relative strength index (RSI) because it helps to identify levels at which the price might turn up or down from overbought or oversold regions.

Take for example the daily USD/CHF chart below:

USDCHF

In this chart, we can see that the price rose to the 0.618 Fibonacci level, hitting at the same time an overbought point indicated by the RSI signal line touching 0.60. The price stalls at this level and starts to double back producing a sell signal.

The position is closed at the point at which RSI goes to oversold coinciding with the price dropping to the formidable 200 day moving average. It should be noted that following this trade, the price can be perceived as range bound with strength limited by the 0.50 Fibonacci level and weakness supported at the 0% Fibonacci level.

In summary, we can see that Fibonacci percentages are best used in combination with other technical indicators. In fact, most analysts would say that it is quite ineffective by itself. Fibonacci levels should never be seen as exact points to enter or exit positions and therefore other technical indicators must provide important context. Fibonacci levels on a chart should be viewed as approximate areas at which the market considers its next move and not as a clear cut mathematical marker.


All essays, research and information found above represent the analysis and opinion of Leverate only. As such it may prove wrong and be a subject to change without notice. Opinions and analysis were based on data available to the author of the respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Leverate does not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Leverate is not a Registered Securities Advisor. By reading Leverate’s reports you fully agree that they will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investment trading and speculation in any financial markets may involve risk of loss.e risk of loss.

Editors’ Picks

EUR/USD stalls below 1.1500 as Fed holds, Trump comments lift Dollar

EUR/USD stalls below 1.1500 as Fed holds, Trump comments lift Dollar

The EUR/USD trades almost flat after climbing past the 1.1500 figure, following the Federal Reserve's decision to hold rates unchanged, amid increasing tensions in the Middle East. This, along with comments from US President Donald Trump, boosted the Dollar, capping the Euro’s advance. 

GBP/USD holds steady post-FOMC, BoE on deck

GBP/USD holds steady post-FOMC, BoE on deck

GBP/USD spun a circle on Wednesday, rising and falling through the Federal Reserve’s latest rate hold. Cable is caught in intraday consolidation near the 1.3400 handle, as Pound Sterling traders gear up for the Bank of England’s own interest rate decision, due early Thursday.

USD/JPY recovers above 145.00 as US Dollar's haven demand strengthens

USD/JPY recovers above 145.00 as US Dollar's haven demand strengthens

USD/JPY is recovering ground above 145.00 in Thursday's Asian trading. The haven demand for the US Dollar gathers strength on likely US attacks on Iran coming this weekend. Hawkish hold by the Fed on Wednesday also supports the Greenback while the Japanese Yen struggles to retain control, despite risk aversion. 


Editors’ Picks

AUD/USD stays weak below 0.6500 after Australian labor data

AUD/USD stays weak below 0.6500 after Australian labor data

AUD/USD keeps losses below 0.6500 in the Asian session on Thursday, showing little to no reaction to the Australian jobs data for May. Trade uncertainties, escalating geopolitical tensions and the Fed's hawkish pause weigh on investors' sentiment, undermining the risk-sensitive Aussie.

USD/JPY recovers above 145.00 as US Dollar's haven demand strengthens

USD/JPY recovers above 145.00 as US Dollar's haven demand strengthens

USD/JPY is recovering ground above 145.00 in Thursday's Asian trading. The haven demand for the US Dollar gathers strength on likely US attacks on Iran coming this weekend. Hawkish hold by the Fed on Wednesday also supports the Greenback while the Japanese Yen struggles to retain control, despite risk aversion. 

Gold price bounces off weekly low; bulls seem reluctant amid hawkish Fed

Gold price bounces off weekly low; bulls seem reluctant amid hawkish Fed

Gold price attracts some dip-buyers during the Asian session and reverses part of the previous day's slide to the weekly low amid a revival of safe-haven demand, bolstered by trade uncertainties and rising geopolitical tensions. Moreover, a subdued USD price action acts as a tailwind for the bullion.

Bitcoin, Ethereum, XRP hold steady as Federal Reserve leave rates unchanged

Bitcoin, Ethereum, XRP hold steady as Federal Reserve leave rates unchanged

Bitcoin and altcoins, including Ethereum, XRP, and Solana, saw slight movements on Wednesday as the crypto market stayed resilient following the Federal Reserve's decision to leave rates unchanged at 4.25%-4.50%.

In the Eurozone, inflation is also a monetary phenomenon

In the Eurozone, inflation is also a monetary phenomenon

Monetary aggregates continue to be closely monitored by the European Central Bank (ECB), a sign that, despite the passage of time and the increasing complexity of financing circuits, quantitative theory remains relevant. 

RECOMMENDED LESSONS

7 Ways to Avoid Forex Scams

The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?

What Are the 10 Fatal Mistakes Traders Make

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.

The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Strategy

Money Management

Psychology

Best Brokers of 2025