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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 here on the Daily Chart, but first we need to be aware that in about 50 or 55 minutes from the recording of this video there will be some news out of Canada that could dramatically affect this currency pair, but what we want to do is start taking a look at some of the levels where the market might react after the release of that data.
So lets start here on the Daily Chart. We could see some different support and resistance levels highlighted in the different colored, shaded areas. We’ll start with the pink-shaded area because that’s the most recent area the market has reacted to. We look between 1.0940 and 1.0905. That’s the pink-shaded area and we could see the market has held for the past three days into support, into that pink-shaded area.
You go back a few more days and you could see some more support into that pink-shaded area. You go back even a few more days. You see resistance, support, congestion, several weeks ago resistance, resistance, several weeks ago support, support, resistance. So, we could see that that pink-shaded area has been highly important for the USDCAD, and that’s just above the 1.0900-level.
Over the past few weeks, we’ve also studied the 100-day moving average. That’s the green line coming here, flowing into the chart, and of course the current market is above that moving average. Now, that’s our current support. The pink-shaded area. Just above the market is the green-shaded area, and that’s our current resistance, where the market, over the same past two or three days have been holding as resistance. That goes between 1.0985 and 1.1011. So, we could see it just right around the 1.1000-level holding as resistance, but not just over the past couple of days.
You go back a little bit farther. You see resistance here several days ago. Resistance here. Resistance here back into August. Then you go back to the left-hand side of the chart again. You see resistance, congestion, support, support, resistance, resistance. So, the green zone is our area of resistance. Let’s go ahead and put a couple of arrows to represent these two areas. First off the pink zone, which we’ve already identified as support, and the green-shaded area as our current resistance.
If we were to break above, the market turns and breaks above the green-shaded area, the yellow-shaded area becomes our next area of resistance. We could see there’s a trend line coming down from the top. We’ve talked about that in the Trade Room over the past few days. We’ll look at it again later on today, but there’s our last resistance. It’s not too hard to see that. And again, you follow it back to the left. You see the congestion in that yellow-shaded area on the left-hand side.
And of course if the market breaks under the pink-shaded area, the next area of support of course will be right there where the moving average is, the 100-day moving average, and the blue-shaded area become your next area for support. That’s down into the mid to low-1.0855, down to 1.0830-level, into the mid to low-1.0800s. So, the blue zone: support. Pink zone: support. Green zone: resistance. Yellow zone: resistance. And that’s clearly the closest levels that we can look at for the intraday today. And of course a breakout of any of those, above the yellow zone goes higher. Below the blue zone goes lower. And of course if it gets under that moving average and this black trend line here, we would likely look for further reversal for the USDCAD.
Let’s take it down to the bottom of the chart. Forex Black Book trend bar is green. Gives us a little bit of a bullish bias because over the past several weeks along the black trend line we have been an uptrend, but it is green, dark green because over the past few days it’s been going down. But that’s good news for the Forex Black Book traders because if you’re going to buy this currency pair, what do you want it to do first? You want it to go down. Does that guarantee it’s going to go back up? No, it just tells you that gives you a lower risk, higher reward opportunity to trade when it goes down into support rather than buying into resistance.
Let’s go ahead and take that information down to the 4-Hour Chart. And as we get down here, we could see where yesterday’s bank flow levels sit. Yesterday’s levels were just above this green-shaded area, between 1.1017 and the blue line, 1.1041. That’s the bank flow sell levels from yesterday. The buy levels down here, close to the black trend line and where the blue-shaded area is, between – we’ll call the top level first – 1.0895, down to 1.0863. Those were the buy levels. You could see we came off of the sell levels. Actually the sell levels came out after the market had already fallen off of that green-shaded area, so that wasn’t very useful. And once the levels came out, we never really saw the market go close to those levels.
So, I think the market is kind of in an indecision phase right now if you want to take a look at that because we’re trying to decide. Are we going to go down? Are we going to breakdown or are we going to break back higher again? And I think we’re still in that indecision moment where we have to wait to see how really probably the news today will affect this currency pair.
Now, if you’re looking at this, you’re probably looking at maybe a head and shoulders pattern here if you take a look. And let me just put a couple of Xs here. Right here on the left-hand side, right here on the right hand side, and of course the top is right here. So, if this ends up being the head and shoulders pattern for reversal, we would of course look for the breakdown of that neck level, if you want to call it that, there into the pink-shaded area. It’d have to break through these supports. If you’re going to follow that as a clue to direction, then you would likely be selling the green zone or break underneath the pink zone. Those are your opportunities there, but don’t forget about the trend.
I don’t want you to forget about this black trend line down here and the Forex Black Book trend bar. Don’t forget about that because if you’re selling, you’re selling against that trend. Watch for further clues of resistance and reversal. Right now we’re between the pink and the green-shaded area. I don’t think either way you look at it, whether you’re buying or selling, this is the best place to buy it or sell it. I think you want to be as close as possible to the green zone or the pink zone to give you your lowest risk. When you’re establishing what’s your risk, you’re looking for stop loss placement and your risk becomes much smaller for selling into the green zone. Smaller for buying into the pink zone.
So, wait for it to reach one of those areas. And really you might even wait until the news pops up in about 45 minutes from now and that might give you another clear reason to look for a direction. But I think the yellow, the green as your resistance. Pink and blue as your support today. The trend is up. That has not really changed yet. There’s no real evidence that the trend has changed, so keep that in mind, but we do see of course that head and shoulders there. That could be our first clues to potential trend change and that would of course mean a breakdown of the pink zone, the blue zone, and a continuation lower for the USDCAD today.
