Technical analysis is a powerful tool to forecast the price action in Forex market. It is more popular than fundamental analysis in currency trading and is used both by beginning traders and experienced professionals equally. But is it that cool and omnipotent? There some situation when good old technical analysis can ruin your trading.
News of high importance. When very important news are released with the unexpected outcome that greatly exceeds any forecasts, even the most certain technical patterns get ruined. It is a real trading suicide to rely on technical analysis in the chaos that rules after such releases. Disaster/terrorism news also tend to affect Forex market in a similar way.
Holidays market. Trading during big holidays (such as New Year and Christmas) is not advisable at all. Technical analysis fails there because the volume of trading is extremely low and the market becomes highly unbalanced with large spike movements possible in each direction. Big speculators can forge the market to their own liking during such periods.
Bubble rallies and bursts. When some market gets a hype, it is hardly obeying common rules of technical analysis. In Forex, when some currency goes up like a bubble (recent carry trade hype is a good example), another currency from the pair goes down at the same extent. Trading on sharp rallies can be very profitable, but do not expect your support and resistance levels to work there.
Remember the situations when playing by technical analysis is dangerous and you will be able to apply it only in a friendly environment, where your strategy will not be hurt by any force majeure. In Forex technical analysis can be your best friend, so do not let some circumstances turn it in your worst enemy.