The Law of Cause and Effect - (FOREX)

The Law of Cause and Effect works on everything including the markets, I use it in my analysis on a daily basis. A good example to this would be the recent EURO bailout. We all know that it was a bad idea, Jim Rogers said that the currency has nailed its coffin. I am not going to get into fundamentals, information on that can be found anywhere on the web, instead I am going to demonstrate through technical analysis what I mean by cause and effect on the EURO chart.

As demonstrated above, the heavy buying after the news ignited the bulls temporarily, and as market participants came to understand that their investments weren't sound and that the euro was getting into deeper trouble by implementing the bailout, market participants decided to exit the market and added Euro supply sending the EURO down. This can turn ugly if the EURO fails to hold support at the October 2008 low at 1.2330 which its approaching really fast. if IT does breach then 1.1700 is the next hurdle.