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Transcript of Video
I’m going to get started today with a recap of one of yesterday’s trades from the Trade Room. Over the past few days, we’ve been talking about the major resistance on the USDCAD into the low to mid-1.1600s, the yellow-shaded area you see at the top of this wedge formation, between the red and the blue trend lines.
You see the yellow-shaded area. That’s been our resistance zone for the past few days. We’ve taken a couple of different times, sells into the mid-1.1600s, right around the 1.1650-level, the top of that yellow-shaded area. And if you did that, once again, yesterday, you’re now seeing about 50 to 60 pips of profit. You’ve seen as much as about 80 to 85 pips of profit on yesterday’s spike low.
So, if you took that trade from 1.1650 yesterday, you should be protecting profit, looking for further movement down, but be watchful for the return of the longer-term uptrend. We could see that it’s coming down towards that red line. The blue trend line that sits there on the chart. So, as it sits down there, mid-1.1500s, definitely could find some support. So, if you’re in a sell, protect the profit. If you’re not in a sell, I don’t think that this is your very best opportunity to sell it, but more likely, the lower it gets, you’ll be looking for new opportunities to trade in the direction of the trend.
Now, for today’s analysis, let’s move on over to the Euro versus the US Dollar [EURUSD]. I’m starting here on the Weekly Chart. Get a longer-term perspective first. Then we’ll come back into the current timeframe. First off, the previous uptrend. We’re looking all the way back here in 2012 on the left-hand side of the chart. Bottom left. Taking Fibonacci from that low on the bottom left-hand side of the chart to the highest high, and that’s that previous long-term uptrend. Taking Fibonacci retracement measurements of that range puts the .886 fib right at the 1.2264-level. That’s the middle of that green-shaded area that we see at the very bottom of the chart.
So, .886 fib of this long-term uptrend sitting there in the green-shaded area. Again, follow that green-shaded area backwards in time. We, of course, can see current support over the past three weeks has been into that green-shaded area. If you go back even further, you take a look. Seven weeks, eight weeks really, challenging that green-shaded area. A couple of times getting underneath it, but unable to sustain a hold underneath that green zone.
And when I talk about breakouts in the Trade Room, I’m typically looking for a singular candle body. Not just two candles, but a singular candle body open and close underneath a support level. So, this green-shaded area as support, we need a full candle body underneath it to confirm that it’s going to go lower. As long as it doesn’t do that, like it did over there in 2012, we could see potential bounces and reversal for this currency pair. So, definitely something to keep in mind over here on the left-hand side of the chart.
So, clearly this is an important price level for the EURUSD, here into the mid to upper-1.2200s. Now let’s take and go back over here. We can see of course we’ve been in a downtrend for quite some time. A period of congestion down here at the bottom of the chart. Like I said, there’s three weeks now where we’ve just been bouncing around on top of this green-shaded area. Even with FOMC, we saw a dive down towards here, but it came to a complete stop right there at the green zone. So, definitely a clear barrier for the EURUSD right now is this green-shaded area at the very bottom of the chart.
Now, I could take some Fibonacci of the current downtrend. I don’t think it’s really going to help us a lot today if we went from the high to the low. The .236 is a little bit higher, probably up here closer towards the blue trend line. Well, let’s go ahead and do it. Taking Fibonacci from the highest high, down to the lowest low, and once again, like I said, the .236. The closest Fibonacci retracement level is all the way up here towards the blue trend line and into the low to mid-1.2600s. So, not really a part of today’s trading experience because it’s too far away.
Now, we could probably take some closer fibs. We could go from this high right here in this green-shaded area, down to the lowest low, and that’ll get us much closer, but at least right now it wouldn’t help us because we’re into support and not into resistance for the EURUSD. As it sits on top of the green-shaded area, I’ll be looking for support and potential reversal. That’s one opportunity that we’ll look for today, or the break underneath it looks for the continuation lower.
Let’s take all that information down to the Daily Chart. It really won’t change it for us today, but trading in the direction of the trend, as I say every day in the Trade Room, means that you’re looking for selling into resistance, not selling into support. So, for the day today, we know that the support is here. We’ve seen it. We’ve studied it. We know the support is here. Just take a look back in history, and I’ll just give you one prime example of what I would expect for the day today. And we can say this right here.
Let’s go just with this right here. I’m going to put this circle on here. Expand it out. You can see right here, where we saw a pretty healthy push down. Big, red candle hit the yellow-shaded area and bounced up for three days. So, dip, support, bounced up. You can even go back a little farther. There it is. Dip, support, bounce up. Dip, support, bounce up. So, we saw the rally, yesterday’s fall, support. Now what would you expect if you’re looking at similar scenarios like what you see right there? I would expect we’re looking for support and maybe a little bit of a bounce back. That means you don’t really want to sell it now. You want to wait for it to go up.
You want it to go up, maybe towards the yellow-shaded area, similar to what you see over there in the red circle, where it bounced up, found resistance, blue zone, and then went back down. So, you want it to go up. Yellow,, maybe even the orange-shaded area before it finds resistance again to go back down. So, if you’re going to sell it, it needs to go back up first. If you’re going to buy it, as close as possible to the green-shaded area, being watchful. Your risk on any buy scenarios of course is a breakdown of this green-shaded area and you look for it to go lower.
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, I’m going to zoom out one time, and there’s that big, red circle, but I need to bring it in something like this because that’s the area that we were just looking at on the Daily Chart. The fall, the support in the yellow zone, the rally to the blue zone. Real quick let’s take Fibonacci of just this little range here in the blue circle, from the high, down to the low.
It retraced. The blue-shaded area was the .618 fib, and then went down. So, it was the downtrend. Let me move it like this. We see it like this actually. So, you see the down move, retraced to the blue zone, the .618 fib, and then the fall. So, if we were to take a very similar scenario, let’s take that fib off, and now let’s take a fib of the current down leg, from the high, down to the low. Where’s the .618 fib? That’s all the way back up here towards the orange-shaded area. .382 is the yellow-shaded area.
So, clearly, if we’re going to sell this currency pair at this point in time, it would be much more prudent to wait for a rally back to resistance, the yellow or the orange-shaded area before selling it. You don’t sell it on top of the green-shaded area. More likely today you’re looking for support. You’re looking for reversal. You’re looking for selling into resistance. Potential buys today into the green-shaded area for the EURUSD
