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I’m going to get started today on the US Dollar versus the Canadian Dollar [USDCAD]. I’m going to start all the way out here on the Weekly Chart so we can get a long-term perspective of what the trend has been doing on this time compression. If you go all the way back to the left-hand side of the chart, all the way down at the bottom of the red trend line, we’re looking back into September of 2012.
So, as you can see, since September of 2012, this currency pair clearly has been in a long-term uptrend. It’s been rising, higher highs and higher lows. You can see multiple instances, especially through 2012 and 2013, coming along that red trend line. Then we saw a pretty aggressive push the last time it touched the red trend line, pushing all the way up to the top of the chart into the 1.1200s.
In recent weeks, we have seen a fall against that overall long-term uptrend. We’ve seen a downtrend developing, as we fell from starting back here in the mid-part of March of this year; it’s been going ever since. What’s most interesting about that is now we’re challenging once again right back at that long-term red trend line. So, we’re at a critical decision point for this currency pair. If we’re going to continue the downtrend represented by the blue trend line, it’s going to be imperative for this currency pair to break through this trend line. Break through likely that yellow-shaded area in the middle of the chart, which represents historical resistance back here on the left-hand side, and we’ll need to get through there if we’re going to continue the bearish pressure and the downtrend that we’ve seen for the USDCAD.
If it cannot break through this area – again, yellow zone, resistance back here, red trend line. If it cannot break through this area, we could see once again a return of the buyers and an uptrend start to move back up again in the direction of that long-term uptrend. Of course that’s going to take a break of that blue trend line if that’s going to take place.
Let’s go ahead and take that information now down to the Daily Chart. And as we get down here to the Daily Chart, there’s the same red trend line down there at the very bottom of the chart, just coming into the bottom of the chart. There’s the same yellow-shaded area representing historical support and resistance. There’s the blue trend line coming down from the top representing our most recent trend. And as we could see here, and I’m just going to count them out for you. This is, again, the Daily Chart, so each candle represents a day. Concluding today, nine or ten days where we can see the market has been just kind of waffling around in a period of congestion.
We’re in congestion right now. The market is kind of trying to decide what to do with this. Are we going to continue to pressure lower in the downtrend or are we going to finally find support and start to reverse and go back up. I don’t think we have any real solid evidence of either direction yet. There’s no clues for continuation. You know, we do have a bias in that direction, but we are hitting into a major area of support, but there’s no clues to continuation. It has not broken through a support yet.
There’s also no real clues or solid evidence of reversal yet here for this currency pair. No candlestick structures that imply reversal. No patterns of reversal. So, you just have to be a little bit cautious here, waiting for really a breakout of this period of congestion. I would suspect you’re either looking for a break under the green zone to signal a push down at least to the yellow-shaded area, or above the orange-shaded area – the tiny orange-shaded area that you see there – for a continuation back to the pink zone, or maybe even a break above the pink zone, a new challenge of the longer-term blue trend line that you see there, here on the Daily Chart.
So, at least, at this point, this area right here, the orange and green-shaded area is your period of congestion. Zoom it out one time. This really isn’t anything new. We’re still on the Daily Chart. I’ve zoomed out so we could see further back in history. You go back here to the left-hand side of the chart. We looked at this several weeks ago or several days ago. This little, red box on the left-hand side between the yellow and the pink-shaded area. This really isn’t a new area of congestion. We’ve seen it before.
We’re a little bit tighter over the past ten days than it was back there on the left-hand side, but it’s a period or area of congestion that isn’t really anything that we haven’t seen before. So, really we need to see a breakout. First off, the orange and green-shaded area. The little tight zone we’ve been in for ten days, and then potentially the pink or the yellow-shaded area. If we can get above the pink zone, we’ll go higher. If we can get below the yellow zone, we’ll go lower within the overall downtrend. So, one of those two will give us a clue to an overall long-term direction for this pair.
Of course tomorrow we do have Canadian employment data being published, so that could be the catalyst that this currency pair needs to break out of this zone or period of congestion. Let’s go ahead and take all of that information down to the 4-Hour Chart. Let me squeeze it in a little bit so we could see all of that same information. We know that the yellow zone is a break out of support. We know the pink zone would be a break out of resistance. There’s the orange and the green-shaded area that we’ve been looking at for the past ten days as our period of congestion. Nothing really new there. I can probably draw them over a little bit further so we can get an idea of where they will be for the day today. Pull them over a little bit.
So, again, a breakout of either one of those looks for a continuation. Let’s go ahead and put one more arrow down here at the bottom in the yellow zone. We know that’s likely support. And by the way, we did get our bank flow levels a little bit later yesterday, but we did get them. And as I expected, they’d be a little bit wider than the market because of FOMC yesterday giving it a little bit of room to breathe, but very interesting yesterday we did have both sell and the buy levels with the bank flow levels. So, we saw sell levels above the market and buy levels below it.
If we would’ve seen a spike into either one of those, we would’ve expected support or resistance. It didn’t really happen. So, I still think that those same areas potentially are support and resistance. Pink zone and yellow zone, and the orange and the green zone are our closer areas. Let’s zoom it one more time. Orange zone. Of course above the orange zone, we look for a challenge of the pink-shaded area, so that would be above 1.0675. We look for a challenge of the 1.0700-level, which is the pink-shaded area up here. Back under the green zone, which would be a breakout to the bottom side, we look for it to go back down to the yellow-shaded area.
So, clearly we’re waiting and looking for a breakout of congestion. Higher highs, higher lows will help us identify we’re in an uptrend. Lower highs and lower lows will help us identify a downtrend. So, really, at this point, we need a new lower low under the green zone or a new higher high above the orange zone if we’re going to a see a breakout of this congestion, either today or even going into tomorrow with that Canadian employment data for the USDCAD this week.
