Resistance is a specific price level that price action in a currency pair hasn’t gone above in the historical period being used. Resistance acts as a technical tool for traders to identify significant moves within the time period they are trading. The idea is that the resistance line resists (holds down) all attempts of the currency pairs to go above it.
For example, if a day trader looks at a 5-day chart for the EUR/USD and sees that its lows have touched 1.3800 several times but never went higher, that would form the 5-day resistance level. A longer term trader might look at month over month resistance and see that the EUR/USD has hit 1.3900 many times but has never closed above that, making 1.3900 a significant resistance level. When resistance levels are breached, it can mean the start of a upward move or it can simply be a false breakout. For this reason, resistance alone is not enough of an indicator to make informed trades.
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