Another day, another political event and another forex market sell off.
I’ve marked the Brexit bloodbath on the below GBP/USD chart for comparison, but I wanted to focus on THE WAY that price sold off.
After a huge fall like this, it’s easy to just say that markets lost control within whipsawing price action, before dropping. When in reality, this couldn’t be further from what actually happened.
Even in times of market panic, the selling is always done in a structured, technical manner. Let’s take a look at what I’m talking about.
Having zoomed into an intraday chart, you can see just how structured the selling was. Price hit higher time frame resistance and heading into the vote, failed to make a new higher high. From here price then retested short term support and resistance and after retesting this level price was subsequently destroyed. This is the exact same price structure that we look for on the blog every single day.
Markets are a reflection of human behaviour represented by price. Even in times of panic selling, humans and therefore markets, follow structure!
Dane Williams – @VantageFX
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Source: Vantage FX Blog