USEFULNESS OF TECHNICAL ANALYSIS IN THE FOREX MARKET: THE EUR/USD PAIR

Miguel Lampreia (), Erjola Barbullushi () and Ismet Voka ()
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Miguel Lampreia: Faculty of Economics, Instituto Politécnico de Beja, Portugal
Erjola Barbullushi: University "Luigj Gurakuqi", Shkoder, Albania
Ismet Voka: Faculty of Economics, European University of Tirana, Albania

Sustainable Regional Development Scientific Journal, 2024, vol. I, issue 1, 104-112

Abstract: Financial forecasting is a topic of great interest to the economic and academic community. The ability to predict currency market movements in advance has financial benefits for investors as well as companies. Technical analysis is one of the most well-known methodologies that investors use in financial markets, with the purpose of predicting the direction of asset prices through the analysis of their price history (Hudson & Urquhart, 2021). Therefore, to prepare this study, we sought to study the applicability and usefulness of technical analysis in the foreign exchange market, using, for this purpose, some of the most used tools among investors, namely, trends, supports and resistances, Fibonacci retracements and graphic patterns (Chen, 2010 e Dumiter & Turcas, 2023). The tools available for technical analysis were applied to the EUR/USD currency pair in 2019. In this study, it was possible to validate the technical analysis tools covered and prove the applicability and usefulness of technical analysis in the foreign exchange market. The tools available for technical analysis, trends, trend and channel lines, support/resistance zones and Fibonacci retracements have demonstrated their validity, as they are useful in predicting possible trend reversal/continuation zones. Reversal chart and candlestick patterns demonstrated their validity, since when found on the charts of the pairs under study, it was possible to verify their effectiveness in predicting trend reversal. Graphic continuation patterns also demonstrated their validity in predicting trend continuation, since after its break, the trend direction prevailed.

JEL-codes: E12 E40 (search for similar items in EconPapers)
Date: 2024
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