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I’m going to get started today on the Euro versus the US Dollar [EURUSD]. Starting here on the Weekly Chart, we could see that for the past several weeks this currency pair has been in a downtrend. You could see that represented by the red trend line here as it’s continued to pressure lower, falling from the highs on the chart all the way up towards the 1.4000-level, now sitting down here into the 1.2800s. So, quite a nice downtrend here for this currency pair.
And we don’t really see any evidence or clues to trend change. Typically, in a downtrend, you’re going to see lower highs and lower lows. So, if we’re going to see evidence or clues to trend change, we’re going to look for a change of that price pattern, which would be higher highs and higher lows, and we don’t really see evidence of that yet.
We’d also look for a massive influx of buy orders, and we also don’t see that if you just take a look at last week’s candle. This is the Weekly Chart, so last week’s candle was a long, red or bearish candle here, so we don’t see any evidence candle-wise, price action-wise or even price pattern-wise of a trend change. But as it continues to go down, we will look for clues to where we might expect to see that trend change and we can look back in time.
Let’s follow some of these shaded areas and I’ve put the shaded areas there to represent these areas of decision, where the market is making a decision to enter or exit the market. So, if the market is in sells, where is the most likely place that they might look for exiting those sells or maybe even buying against the current trend or a change of the trend. So, let’s follow it back in time.
First off, let’s look at the pink-shaded area down here at the bottom of the chart. We follow that back and take a look back here. We’re going all the way back into 2012. We’re here into March of 2013. We’re looking around May and then again in June of 2013. So, quite a bit of evidence back here in the past that this pink-shaded area is one of those areas where the market made a decision. Instead of continuing to sell, the market turns into a buying bias at that moment in time. So, you could follow it back in time and see that’s a decision point where the market has made that decision, between 1.2700 and 1.2780. Not quite 1.2800. So, we could see that pink-shaded area.
And the current market is approaching that next target for support. We can use that support as a place to target if we’re selling and, of course, a target of potential reversal also as support. And we could see that back in time historically and as evidence of that potential reversal. Also, here on the Weekly Chart, taking Fibonacci from the lowest low, bottom left corner of the chart, to the current resistance high puts the .618 Fibonacci retracement level at 1.2787, and that happens to be right at the top of that pink-shaded area. So, very interesting there. Top of the pink-shaded area shaping up nicely as a support or the next support here for the EURUSD.
Just above that is the green-shaded area and we could see that two weeks ago the weekly candle, the smaller weekly candle found support into the green-shaded area. You follow that back in time. You could see, again, historical evidence of support, reversal from this green-shaded area. That also happens to be the .886 fib of this shorter range from the pink zone to the current resistance high. So, green zone is resistance, pink zone is support, and currently so far this week we’re holding in between those two levels. Forex Black Book trend bar has remained red this week.
Let’s go ahead and take it down to the Daily Chart, and there we are. Over the past several days, we’re looking back. Let’s just count them out. Including today. Well, let’s not include today. Let’s go back to last Friday. Eleven days that we sat between the green and the blue-shaded area without any real solid breakout. Now, I didn’t include today’s candle because today’s candle is opened underneath. This is our first daily candle in over eleven or twelve days to see an open underneath that green-shaded area, again, that has held as support over the past few days. So, that’s our first clue or our first piece of evidence that we may be looking for the continuation from the mid-1.2800s, which is the green zone, down into the upper to mid-1.2700s, which is the pink-shaded area that we looked at from the Weekly Chart.
Forex Black Book is red. Continues to pressure down. So, all of that tells me that it’s more likely that I’m looking for sells on rallies to resistance, which at least at this point may be that green-shaded area. I would of course continue to look for price action to stay underneath that green zone as support or as resistance right now for the EURUSD. Let’s go ahead and take all that information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, we could see the market holding underneath the green-shaded area. Historical support here and back here. These historical support levels have now acted as resistance into the 1.2850s.
So, if you’re looking for anything to do today, your lowest risk, highest reward opportunity may be for selling underneath the green-shaded area. Using that as your resistance and your risk assessment. Your risk assessment is the fact that you prefer it to stay underneath the 1.2900-level. If it breaks back above that green-shaded area, that’s the risk in selling. If it breaks back above that green-shaded area, where does it go? It goes back to the blue zone. Why? Because historical evidence shows resistance there into the blue-shaded area. And of course we’ve already outlined our next support target is all the way back down here.
So, these four black arrows here showing you your opportunities for today. Staying under the green zone, today, tomorrow, over the next few days, we look to continue to target lower levels in the direction of the trend, which the next level would be the pink-shaded area down into the mid-1.2700s. If it breaks back above the green zone, we look for it to go back to the blue zone. That’s the risk. If you were to buy it right now, it’s very risky because you’re just underneath your resistance target, the green-shaded area. So, no buys right now. We might look for that as it tests back down there to the pink zone, or above the green-shaded area, but right now for the intraday it seems to be the most logical decision is selling under the green zone, targeting the pink zone for the EURUSD today.
