Sometimes, however, support and resistance are fixed almost always a “historic” high or low that was noteworthy for having been the highest or lowest in a long time. For example, on June 24 the Euro/U.S. dollar rate (EUR/USD) passed down through the round number 1.2000 to a low of 1.1983, the lowest low since the week of Sept. 3, 2004 (10 months).

The market had been watching the round number for a while, wondering if it constituted some form of magic support, as round numbers sometimes do. The breakout below 1.2000 implied further Euro losses. Sure enough, on July 5 the Euro hit a fresh low of 1.1867, but on July 8 it managed to make a low of only 1.1874 — a mere seven-point difference, but it was not a lower low, which didn’t escape anyone’s notice. Moreover, the bar configuration of those few days was not favorable to a further Euro drop: On the date of the lowest low, the close was higher than the open and the previous day’s close, which proved to be the configuration for most of the next five days.

This was a signal to professionals that a bottom was forming around the support area of 1.1867 1.1874, and if you can’t sell it for a gain, you should buy. You might say the stage was set for the Euro to rise and the dollar to fall, but at the same time resistance was well-established at the previous highs around 1.2225.

The next move in this little saga was the mysterious rise in the Euro on July 20. Between 1 and 3 p.m. ET — when European traders have already gone home and the U.S. market is almost finished for the day — the Euro flew upward from 1.2042 to 1.2156 by 3 p.m., an enormous move at any time, and downright astonishing for the time of day.

Everyone was caught by surprise and scratching their heads in wonderment — yes, there was commentary from Federal Reserve Chairman Alan Greenspan’s semi-annual testimony to Congress, but he didn’t actually say anything new and certainly nothing dollar-negative. What really happened? One story had it that orders to sell dollars and buy Swiss francs and Euros were coming out of Switzerland, and perhaps from an official institution. We still didn’t know why the orders had been placed, but the size of the move as well as the timing pointed to a real money source rather than a mere speculator.

The next morning the real news broke — China was revaluing the renminbi against the dollar by 2.1 percent and instituting a managed float based on a new and undisclosed basket of currencies. When the Chinese revaluation report came out, the Euro rose against the dollar immediately, from 1.2139 to 1.2255. The dollar/yen rate tumbled from 112.31 to 110.34 within the first hour. For a short while, at least, it looked like resistance was broken and the Euro was off to the races.

In the nearly two years the Chinese revaluation was on the radar screen, two forex forecasts had become the consensus. First, the yen would strengthen in line (or more) with the renminbi, since China is now Japan’s leading trade partner. Second, it was curtains for the dollar, meaning the Euro would rise. The dollar should fall because the relief in the U.S. trade deficit would be small unless China revalued by 30 to 40 percent, which was politically impossible, and because a shift to pricing the renminbi against a basket of currencies instead of just the dollar would reduce the need for the People’s Bank of China to buy U.S. Treasuries. A drop in demand for Treasuries would cause the price to fall and the yield to rise, which sounds good until you realize higher yields could burst the housing bubble (or “froth,” as Greenspan describes it). With the U.S. consumer reducing (or at least not increasing) spending, the U.S. economy would stumble, growth would fall, and the Fed would be thinking about cutting rates some three to six months after the event.

Sure enough, the day after the Chinese revaluation, the yield on the 10-year T-note soared to 4.276 percent on the assumption foreign demand for Treasuries would fall. No one knows if this is the correct interpretation of events. There’s no evidence of lower demand, and even if official demand falls, private demand may be a perfectly adequate substitute. Remember, much of the foreign capital inflow into U.S. government paper comes from the UK and Caribbean havens, where the banks are “fronting” for the real customers. They may be Middle East oil sheiks — or newly rich Chinese businessmen.

Were the dramatic moves in the Swiss franc and Euro ahead of the announcement evidence the Chinese revaluation was leaked ahead of time? And if it was leaked, why did the Euro rise, and not the yen? After all, the yen made an even bigger move after the release.

We will never know if the puzzling Euro rise was the result of a pre-announcement leak, and if so, who was behind it. Perhaps the Chinese themselves bought some Euros, or Chinese officials with private accounts. Because the Chinese were emulating the Monetary Authority of Singapore’s methodology, maybe it was the MAS. Since Hong Kong and the U.S. were alerted ahead of time, they might have been the source of the buying, too.

For all we know, other central banks (and therefore their government officials) were told as well, not to mention the IMF and the Bank for International Settlements, which were certainly part of the pre revaluation decision process. When a big move is certain to come on an announcement, it’s too tempting to resist making a few fast bucks, even if you’re a government. One possible reason why the yen didn’t move is because Japanese Ministry of Finance has been threatening for some time that it would intervene if it saw the yen move inappropriately.

An event like this comes along very rarely, but when it does, you want to be able to jump on the bandwagon, because there’s usually “real money” behind it. The earmarks of such a move is that it is large, unexplained and in the opposite direction of the existing trend. In the case of the trading ahead of the Chinese revaluation, the time of day contributed to the mystery.