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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. Starting on the Daily Chart today, we can see that this currency pair has been in an uptrend for quite some time. We go all the way back down to the bottom left-hand side of the chart, back in July of 2013. We started all the way down into the mid-1.2700s, and we’ve seen the climb over the past several months, as it pressured all the way up here into the mid to upper-1.3900s.
Now, over the past several weeks, we’ve been studying the resistance at the top of the trend and at the top of the chart, into the purple-shaded area. That purple-shaded area showing our resistance between 1.3925 and 1.3968. So, we saw a couple of challenges. Several days challenging it over here into March, just a few months ago, and then, over the past week, we’ve seen challenges into that resistance high, just underneath the 1.3980-level, into that same purple-shaded area.
Now, we’ve seen a dramatic change over the past two days. The market has now fallen from that purple-shaded area and that resistance all the way back down here into the 1.3700s, once again challenging the blue trend line. The blue trend line coming from the lowest low, connecting to the last low before the highest high, and I could see that low being right here into the pink-shaded area. So, that’s where our blue trend line is connecting, and we are challenging that low today. And really, it doesn’t matter how you draw the trend line. Whether you start all the way down here at the bottom of the chart, like the blue one is, or even if you started right here and drew it to that same low right here, you could see that they overlap and match on top of each other. So, no matter which way you draw the trend line, you’re going to find that it is being challenged today right here into the blue-shaded area, into the upper-1.3700-level.
Let’s go ahead and zoom it in one time here on the Daily Chart. And as it’s begun to fall back down, we also want to begin looking for clues to changes in the trend pattern. What is the trend pattern? That’s what we need to define first. The trend pattern is higher highs and higher lows. That’s specifically the price pattern of an uptrend. The trend line – the blue trend line -, whether it’s blue or black or whatever, is not the trend. The trend is the pattern of price. That’s the higher lows that we’ve seen over the past several months. And along that trend line, you could see that pattern. Here’s a low, here’s a low, and our current low.
Well, even if we go in tighter, not looking at the low here in the pink zone, but the low right here into the blue-shaded area. This is a low right here. This is a higher low. The higher than this low right here. So, if I put two black X’s here rather than a trend line, you can see that the lows have continually gotten higher within the longer-term uptrend. I’m trying to get that X selected. There you go. So, the lows have continued to get higher. If that changes and we see a new lower low, then we see a change in the overall trend pattern. Of course, at this point, it would also break the trend line. That’s good. That’s a visual cue of a trend change, but right now we’re looking for a break of the trend line, but not only that. We’re looking for a new low to be made, so then we see the change of the trend pattern. Instead of seeing higher lows, we see lower lows.
So that’s what we’re looking for today. A break of this blue zone, a break of the blue trend line begins a change in the overall trend pattern for the EURUSD. So, for the day today, if we see the open and close today and going into early next week underneath the blue trend line, the blue-shaded area and that last historical support low that we see here, then we’re likely looking for a continuation lower. This yellow-shaded area has potential to show some support today. Let’s go ahead and draw that over a little bit further. That yellow-shaded area has potential to show some support today between 1.3760 and 1.3730. You can look back in time and see some support, resistance, congestion all inside that yellow-shaded area back here, so it’s likely to show some support there today, but clearly the breakout underneath the trend line will be the visual cue that we’re looking at over the next couple of days to tell us if the trend is actually changing.
If it doesn’t and it stays within or above that blue-shaded area and that blue trend line, we could be looking for a return of the longer-term uptrend. Continuing down, yellow zone and possibly even the pink-shaded area, where this next low is, becomes our potential profit target. So, no matter which direction you’re trading, if you sold it into the purple-shaded area several days ago or a couple days ago, then you’re now following profit. If you sold it up here at the resistance highs, you’re following profit as it challenges now back into the blue zone. You’re cheering on the sellers to continue this bearish run and push it to the yellow or the pink zone.
If you’re not in a sell, I don’t think right now is your best opportunity to sell it. Remember the motto: buy low, sell high. Well, right now we’re at the end of a long two-day run. We’re at a very low point. So, there is a possibility of a bounce back. And a good visual example of that is right here. The last time we challenged that purple-shaded area. Hit the purple-shaded area, found resistance, two days, two big, long red candles, hit the yellow-shaded area, and then just bounced around for several days, eventually drifting a little bit lower to the pink zone, but the visual cue is right here. This is where it hit the yellow and the blue zone and hesitated for some time.
You can even go back even farther. You go back here, where it had a quick spike higher, a reverse for a couple of days, two long red candles, bottom left-hand side of the chart, hit the orange zone and had a little bit of an intraday bounce back. So, that’s an example. Here’s an example. Here’s an example. So, just because we’ve seen two big, long, red candles doesn’t mean it has to continue lower. Now, it could, but it doesn’t mean it has to. So, I don’t think right now is your very best opportunity to sell this currency pair. I think, more likely, for the intraday, you may be looking for support and reversal to go back up, at least a little bit of a breather. Taking it back up to the green-shaded area would be of course your first resistance, and I’ll put one more arrow here at the yellow-shaded area.
So, those are your areas to watch today from the Daily Chart. One quick move down here towards the 4-Hour Chart. So, we can see all of those same levels at the same areas – the blue, the pink, the yellow. All those shaded areas will be at the very same location, but it just gives us a little bit of a zoomed in view and more detail to the chart. There is the blue-shaded area. Look at all the support back here. Support, support, support, support on the 4-Hour Chart, inside this blue-shaded area. We even saw an attempt to spike underneath it right here. So, don’t get too caught up on this spike below the blue zone yet.
Now, if it opens and closes underneath there, yes, look for it to continue down to the yellow-shaded area. And we’ll likely, in the Trade Room today, squeeze this yellow-shaded area in a little bit and try and hone in some more detail. If it doesn’t break through here, staying above this blue-shaded area, we’re back to the green zone as our next resistance. And of course above the green zone, a challenge of the higher highs. Over the past few days, we have seen the bank flow levels capping the market. I suggest that today, when we get our new bank flow levels today, they’ll likely be down here towards the green-shaded area. Unless something dramatic changes between now and the 10AM hour when we get our bank flow levels, it’s likely that those levels are going to now drop back down here towards the green-shaded area later today. We’ll check that out in the Trade Room, so please join me in the Trade Room today and we’ll look at the bank flow levels and all of the reactions to these same support and resistance levels later today for the EURUSD.
