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Getting started today on the Euro versus the US Dollar [EURUSD]. Starting on the Daily Chart, this currency pair has been in an uptrend for quite some time. We go all the way back into June and July of 2013. Bottom left-hand side of the chart, we’re all the way down into the 1.2750s. Since then, we’ve been climbing within the uptrend. We see higher highs and higher lows after it capped out into the upper-1.3900s, right around the 1.3960-level.
Since capping out back in March 13th, we have seen the market fall back down towards the 1.3700-level, a little bit of a rally back into the 1.3900s, and now a little bit of a fall once again. So, we see some contraction out of the market. Within the uptrend, of course, we’ve mentioned higher highs and higher lows, but since March 13th, we’ve seen a little bit of contraction, where we still see the higher lows, but we see lower highs. We don’t see the continuation of the uptrend. We don’t see the turnaround and turn into a downtrend. We just see some contraction right now.
So, if we’re going to see a trend continuation, whether an uptrend or a downtrend, we’re going to need a breakout of one of the resistance or support levels within this contraction period that we’re seeing right now. You might even define this as a triangle pattern that has developed with lower highs and higher lows. Now, there is some expectation. We might see, over time, a turn in the direction of the trend, but there’s no guarantee of that. Of course we could see a turnaround and a change of the overall trend.
So, for right now, we’re going to trade within this period of contraction, lower highs and higher lows. Let’s go ahead and zoom it in one time here on the Daily Chart, and we could see currently holding as resistance, over the past week and a half or so, underneath this green-shaded area. Follow it back in time. You could see, going all the way back here, resistance resistance underneath the 1.3845-level. Even going to the left-hand side, you could see resistance here and you could see some support here. Far left-hand side of the green zone, even a spike high over here on the left.
So, that green-shaded area right now acting as our current resistance, which incidentally comes in close contact with this bearish red trend line, connecting the last two resistance highs. The blue-shaded area, over the past few days, has held as our support. I can probably draw that down a little bit, but I like it being at 1.3800 as the bottom of that blue-shaded area. That even price level. That gives me a clear level to watch. A breakout underneath 1.3800, we’ll likely look for the continuation lower. Staying above it, we’re finding support.
Follow the blue zone back in time. Not only do we see support here. We even see resistance here and, on the far left-hand side, some resistance into that blue zone. So let’s go ahead and put a couple arrows here on the chart to give us some expectations for the day today. As long as we hold within or under that green zone, I’m looking for resistance for the day today. Selling into that resistance becomes an opportunity to see the challenge back to the blue-shaded area as a support that we’ve seen over the past week and a half or so. At any time, like I mentioned, if it breaks underneath 1.3800, we’ll look for the challenge back to the yellow zone and the bottom of the triangle pattern that I just mentioned and the blue trend line. The bullish blue trend line.
Forex Black Book at the very bottom of the chart is red, which gives us a little bit of a bearish bias. It’s red because we’ve gone into that period of contraction. It’s not continuing the overall uptrend that we saw along that blue trend line. So, since March 13th, we’ve been contracting. We’ve been falling a little bit, so it turned red a few weeks ago. So, what that means is we’d be looking for sells on rallies into resistance, which, again, would be close to that green-shaded area that we see here on the chart and into that red trend line.
Now, if, at any time, we see a breakout above that red trend line, green-shaded area, of course we’ll look for it to continue the uptrend. If it pushes under the blue trend line and the yellow-shaded area, we’ll look for a continuation of the downtrend.
Let’s go ahead and move all of that information down here to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, we’ll see all the same levels, but we can see a little bit more detail. Over the past week or so, we could see that the bank flow levels, yesterday, the day before. So, so far this week, the bank flow levels have been capped out here into the green-shaded area. So, that, again, gives us a higher expectation that we’re looking for sells on rallies into resistance. Bank flow levels tell us that there’s an accumulation of buy orders just above the market, telling us that there could be some fightback against the buyers and the sellers jumping in and driving this back down.
And we can see that in the current 4-hour candle, where the market pushed all the way up here into the 1.3850s, and now we’re seeing a fightback with those sell orders sitting here into the 1.3850s and 1.3860s for the EURUSD. So, again, staying within or under that green zone, I’m looking for selling opportunities, if you’re not already in it, looking for it to challenge back into the bank flow levels, and the green-shaded area today becomes a selling opportunity. We’re looking for support here into the blue zone as we’ve seen over the past several days. And anything underneath, as I mentioned on the Daily Chart, the blue zone and underneath 1.3800, we’ll look for the turn back down here towards the yellow-shaded area.
So, if you sold into the green zone, bank flow levels from the past two days, you’re looking for the push under the blue zone, targeting back to the yellow zone. If you haven’t sold it, I would want to sell it as close as possible to the green zone or a break underneath the blue zone.
Now, for the buyers in the market, I think there’s really only two levels that I would consider a buy opportunity. That would be down here into the yellow zone, because we’d want to buy it at a lower level, closer to the blue trend line, or a break above the green zone. I don’t think here in the blue zone is satisfactory for a buy right now. I think a buy comes on a break of the green zone or a test of the yellow-shaded area today for the EURUSD.
One last thing. Forex Black Book is red, so you’d be looking for a new red arrow. You could see the last two red arrows came after a little bit of a rally higher. Rally higher. Red arrow. Fall. Rally higher. Red arrow. Fall. What we see now is a rally higher. We’d need to see another red arrow. I’d prefer to see the market as close as possible to the green zone, a new red arrow show up, and giving us a selling opportunity for the EURUSD today. We’ll have to wait for the next 4-hour candle to see if we see that, but definitely something to watch for as we go through the day today.
Any new red arrows with the Forex Black Book give us an obvious point of resistance and a momentum change for the EURUSD and for a selling opportunity. Bank flow levels. Red arrow. Green-shaded area. All of that’s telling me right now the market is being capped and we’re looking for a new sell for the EURUSD today.
