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I’m going to begin the day today on the US Dollar versus the Canadian Dollar [USDCAD]. Starting on the Daily Chart, I’ve zoomed farther out so we could see history for this currency pair. We’re going all the way back into August and September of 2012, where the uptrend began. Bottom left-hand side of the chart, all the way down into the low-0.9600s is where the trend began. And over the past couple of years, we’ve been pressuring higher as we see higher highs and higher lows within the trend, pushing all the way to the top of the trend, into the 1.1200s.
Well, a couple of places that I want to point out here. First off is the box that we see right here in the middle of the chart. The red box, you could see, went into a period of ranging. We’re looking between June 2013 and going to the end, when it broke out in November 2013. So, between June and November, we bounced around in this red box, finding resistance at the top and much support at the bottom. along the purple-shaded area you see at the bottom.
I also have noted this blue circle at the bottom, where it attempted to breakout underneath support, turned right back above, got above the purple-shaded area inside the box again, and then began to move back in the direction of the previous trend. So, we want to take this example and now let’s apply that same example to up here at the top right-hand side of the chart, where we see the box here. We see over the past several weeks. We’re going back into January 20. January 20, we got inside the box. We went above the purple-shaded area. We found resistance up into the mid to upper-1.1200s. The blue-shaded area at the top. We’ve bounced back down and back up a couple of times here on this currency pair.
And interesting enough, if you take a look at the blue circles here, we’ve seen also a time where it attempted to breakout underneath that red box, underneath the purple-shaded area, and got right back above the purple zone and inside the box again. So, if we take the similarities here between the two ranges or the times where it broke out, as long as it stays above the purple-shaded area, within the box, like it did the first time, there’s potential for it to continue in the direction of the overall long-term trend that we’ve seen since 2012.
So, I think that it’s very interesting to look at it in this fashion and something definitely we’ll want to pay attention to over the next several days, as we stay inside the red box. Let’s go ahead and zoom it in here on the Daily Chart. We could see that same area. Both of them a little bit farther now. We don’t see the history of the trend, but we the same areas. I’ve shaded the bottom, the supports, as purple at the bottom of the box on purpose, so we could see the similarities. We could see the market holding, over the past several days, above that purple-shaded area.
Last week we discussed buys into the 1.0980. So, if you are still holding a buy from the 1.0970s or 1.0980s, then you’re still looking for the breakout above the yellow-shaded area and the continuation of the longer-term trend. There also could be a potential opportunity to buy, once again, as it challenges the purple zone, as we see down here several times challenging the bottom of that purple-shaded area before breaking out.
One other thing that we discussed in the Trade Room yesterday is the fact that right now the trend bar for the Forex Black Book is red. So, if you take a look at the red trend bar, you would have a bias to the bear side or bias to the sell side, but it’s been red for quite some time. And I’ll go back, once again, to our previous example, where it broke out underneath the box in the first blue circle down here, bottom left, and it was red then too. Finally got back above the box, started bouncing around as support, eventually turning green, and then starting to move back in the direction of the trend.
So, if, over time, we see the trend bar turn green again, continued support into the purple zone, we’ll look for a turn back in the direction of the trend. If, at least, another challenge of the top of the box and into the blue-shaded area once again for the USDCAD. So, let’s go ahead and zoom it in one more time here on the Daily Chart. And in zooming it in one more time, we could still see all of those shaded area. We’re focusing in on our current range here. The box that we see up here. We could see, of course, support would now. As long as it holds within or above that purple-shaded area, I’m expecting support, and those become buying opportunities on dips into support. They become buying opportunities as we look for that pattern to continue.
Right now, of course, we are finding resistance into the yellow-shaded area. That’s been holding for the past few days. If, at any time, we see the break above the yellow-shaded area, we’ll look for the continuation back to the green zone or the blue zone. If, at any time, we see the break underneath the purple-shaded area and underneath the box, that invalidates the pattern. We likely look for the fall back down into the 1.0800s for the USDCAD.
I’m going to take the circle off because, when I get down to the 4-Hour Chart, it will look really big. So, let’s go ahead and go down to the 4-Hour Chart. There’s the purple zone. There’s the yellow zone. Just as we were describing. Let me zoom out just a little bit. There’s the purple and yellow zone just as we were describing on the Daily Chart. Let me move the arrows a little bit closer.
So, there’s our arrows there. Now we can see that the bank flow levels over the past three days have also implying buying support or some support there into the purple-shaded area. So, again, any dips to the purple zone, any dips into support, into the bank flow levels, into the bottom of our range that we’ve established there on the Daily Chart, we’re looking for buys on dips into support. Now, if you’re already holding buys from the breakout over here, then you’re just waiting for the breakout above the yellow zone and continuation higher.
We have not, over the past three days, seen any sell levels up here. Last week we saw some up here, but we have not yet this week seen sell levels. So, as long as it doesn’t give us any sell levels, there’s potential for us to see this breakout and go higher. We have seen a couple of red arrows over the past few days with the red trend bar. If you’ve taken a sell there, you’re looking to target back to the purple-shaded area for any sells that you might be in. But as long as we stay above this purple-shaded area and above the bank flow levels, I continue to focus my efforts on the buys from the 1.0980-level and we’re looking for the breakout above the yellow zone.
Open and close above the yellow zone likely looks for the turn back towards the green-shaded area for the USDCAD. One last thing. Let’s take Fibonacci from the highest high that you see here on the chart down to the lowest low. And I’m going to change the color of that real quick too, so it’s easier to see. Let me go over here. Let’s change this to blue, and I like it to be that dashed blue line. Actually, let’s leave it the solid color because it makes it easier to see. All right, so there’s the blue line of the Fibonacci. You could see that there. We’re sitting right above the .382. 50% sits right above the yellow-shaded area. So, a breakout above there, we look for the continuation higher for the USDCAD today.
