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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. I want to start on the Weekly Chart and get a longer-term perspective for this currency pair because I think it’s going to be important as we go through the next several weeks for the EURUSD.
The first thing I want to take a look at is this previous downtrend, and this is a long time ago. We’re going all the way back here into May of 2011, where we reached the highest high up here into the 1.4900s. Then we saw a downtrend take hold and it pushed all the way back down here to the bottom of the chart, into the 1.2000s, and that was in July of 2012. So, we’re a long time ago, but I think it’s important because if you take Fibonacci from the highest high, down to the lowest low here on the Weekly Chart of that previous downtrend, the .618 Fibonacci retracement level is at 1.3831.
1.3831 is the .618 of this previous downtrend. And if you’ll notice here, it sits right at the top of where our current resistance levels are. The current resistance that we’ve seen going back to October of 2013 are holding right there underneath that .618. And of course a break through there, we’ll likely look for a continuation higher. But as long as it sits underneath that 1.3831, .618 fib of this previous downtrend, there is of course current and potential further resistance into this level, into the 1.3800s.
Now, a break above here of course will send this back higher. We could even see this back up here in towards the 1.4000s. 1.4400, an extended run higher. But easily looking at resistance right now into the 1.3800-level. Now let’s take that information that we just discovered from the Weekly and pull it back down to the Daily Chart. And again, taking a look at 1.3830, the .618 fib from the Weekly Chart sits just above that yellow-shaded area. It’s where we’re currently finding resistance.
The market continues to shy away from it. Will it forever? I don’t think. I think eventually we may look for a breakout above the yellow-shaded area, above the 1.3800-level, and a continuation to the 1.40-level for the EURUSD. But for the time being, I don’t think I want to buy it, until it breaks above there. Now, if it breaks above there, easily looking for buy scenarios as it continues to pressure higher. But until it breaks through there, I think there’s a greater expectation of resistance.
You can even go back. Like I said, going back into October, you see resistance here. Market couldn’t break through there. Fell back down, back into the 1.3300s. Challenged it again multiple times. Fell back down into the 1.3400s. Here we are again. The question is: are we going to break through this time or is it just going to simply do what it’s done for the past several attempts and fall back down?
Well, falling back down, we have several support levels that we could look for. The blue-shaded area, into the mid to upper-1.3600s. Down into the green zone – 1.3600. The purple zone. We could even take a couple of trend lines here. I’m going to actually this shorter trend line off and let’s put a different one. Let’s just attach a trend line to the last two lows. You see the last two lows there. So, again, doing that, we would expect, if it does bounce off the yellow zone and comes back down, that that is a likely support level as we’ve seen rising lows within this pattern.
And of course we have seen some steady highs along this top above the yellow-shaded area and along that .618 fib. And if you’re starting to recognize a pattern here, it could be that you’re recognizing an ascending triangle. We see rising lows, horizontal highs. Ascending triangle could imply that eventually we will look for a breakout above here. Maybe this time. Maybe the next time. But definitely something that we want to pay attention to over the long term.
For the time being, as long as it stays under the yellow zone, we’re looking at resistance, potential reversal to go back down. Selling into resistance is a possibility. Buying into support is a possibility. Buying right now, I think that your next support is, again, here into 1.3695, 1.3670. The blue-shaded area that we’re seeing right now for the EURUSD.
Let’s go ahead and take that information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, none of that information really changes. It just gives us a tighter perspective for this pair. Of course there’s the yellow-shaded area that we know is resistance historically. There’s that .618 fib at 1.3830, just above the current market. So, anywhere between current market, the mid-1.3700s and 1.3800s, we could find resistance. We do see yesterday’s bank flow levels sitting right here in the middle of that yellow-shaded area, implying that there is an accumulation of sell orders into that yellow-shaded area. That’s what those bank flow levels help us identify; is an accumulation of sell orders.
So, as we’re looking for support, we’re looking for the market to come back down. Challenge into lower levels. Let’s go ahead and put that shorter trend line back on here that I had a few moments ago. There’s this trend line here. I’ll make it a black color so it’s not the same as the longer one down at the bottom of the chart. So we see that blue trend line at the bottom. That was connecting the last two lows on the Daily Chart. We see the black trend line connecting the last two lows on the 4-Hour Chart. Again, the blue-shaded area becomes our spot to watch for the EURUSD.
Yellow-shaded area is our resistance. Anything above 1.3800, potential climb back to the 1.40-level. Let’s go ahead and put a couple arrows down here into the blue-shaded area. As close as possible back down here to the blue zone, 1.3700 becomes potential support. Anything underneath that blue-shaded area and underneath that black trend line continues to fall back down in towards the low-1.3600s – the green-shaded area.
We could find a little bit of support ahead of the blue-shaded area, right here into the 1.3720s. We’ve already seen some resistance there before going back to the left-hand side and even some support. Far left-hand side of the chart. So, the 1.3720s may find some support today, but I think down here closer to the black trend line and the blue-shaded area will our most critical level.
Let’s also take Fibonacci here on the 4-Hour Chart from the last low that we see here on the chart to the current resistance high. Doing that from the last low to the current resistance high, we see the .236 fib sitting right here into 1.3702. That, again, is where the blue-shaded area is. And I can probably extend that blue-shaded area up to that 1.3702, but I like where it is. I’m just going to leave it there and we’ll know that the 1.3702-level is the .236 fib. Clearly a support level for the EURUSD right now.
So, if you’re looking for a buy down here, closer to the blue zone gives you your lowest risk, highest reward opportunity to buy the EURUSD today. If you’re looking to sell this currency pair, you want it to rally back as high as it can get inside the yellow zone. Close as it can get to the bank flow levels. That gives you your lowest risk, highest potential reward opportunity to sell it. But just be aware that if you sell it and it breaks out above 1.3800, likely that you don’t want to continue to hold those sells any longer because we could be taking a push, in the long term, back to the 1.4000-level for the EURUSD.
