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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. Starting here on the Daily Chart, in the Trade Room, for the past several weeks, we have been studying the longer-term uptrend this this currency pair has been in, going all the way back into June and July of 2013. In the most recent weeks though, we’ve seen a contraction pattern or congestion beginning to take shape here, as we rising lows along the blue trend line, which of course would indicative of an uptrend, but we also see falling highs over the past few weeks.
We go all the way back to March 13, where we made the highest high on the chart, up here towards the mid-1.3900s. Along the red trend line, we’ve also see lower highs. So, higher lows. Lower highs. We’ve been developing somewhat of a triangle pattern up here at the top right-hand side of the trend. At the end of this pattern, at the end of this congestion, we would expect a breakout. At one point, we’ll either see a breakout above the red trend line and a continuation of the longer-term blue trend or we’ll see a reversal, a breakdown underneath the blue trend line, and a reversal for a downtrend to begin developing for the EURUSD.
So, we’re waiting for that eventual breakout here for the EURUSD. Until there, over the past several days, we’ve been in a period of congestion. Let’s go ahead and zoom it in one time here on the EURUSD. And over the past, let’s say – count today’s candle. 13 days now. 13 days since April 14th, we’ve been stuck inside, between the green-shaded area and the blue-shaded area. A period of congestion, consolidation, where the market has been in a period of indecision. It hasn’t continued the uptrend. It hasn’t reversed into a downtrend. So, what we would really need to see here on this currency pair is a breakout.
We do see some bullish market behavior now, but yesterday we saw bearish movement down to the blue zone. So, just because it’s moving now doesn’t mean it’s going to be that breakout. What we’d look for would be a push through the red trend line and the green-shaded area. That will give us confidence that it’s going to continue higher. So, at this current moment, I would not suggest buying it. Even though it’s been going up for the past several hours, I would not suggest buying it because we’re running into a resistance that has held for the past 13 days. The only reason, at this point, that I would buy it is if it breaks through that brick wall that’s sitting there in the market.
Think of that red trend line and the green-shaded area like a brick wall. The only reason I suggest buying it would be if it breaks above that, which would be above the 1.3870-level. It needs to break above it. I constitute a break as a clear candle body opening and closing. Not simply a price pushing through it because that could be a false breakout. So, watching for that today will be part of the scenario. The other part of the scenario, of course, is that we continue to find resistance, as we have for the past 12/13 days. We continue to find resistance into the red trend line and the green-shaded area, and we see it go right back down towards the blue zone.
So, as it challenges here into the green zone, this does present an opportunity for a lower-risk sell because your stops are smaller and your potential profit target has now become larger for selling the currency pair rather than buying it. So, here, into the green zone today, as long as it holds within the green zone or below it, I think there’s a better selling opportunity, a lower risk selling opportunity. The Forex Black Book trend bar for the past several weeks, during this congestion, has been red, which leads us to a bearish bias. As long as it stays underneath 1.3870, I believe the bear side is what you want to continue to focus your efforts on for the day today.
And the only thing, again, that will change that and the risk in selling it is that it breaks 1.3870 and continues the longer-term uptrend. Of course targets for any sells that you might take. First target would be the blue-shaded area. That would be back down towards the 1.3811 area. That’s the top of the blue-shaded area. The bottom is 1.3790. So, anywhere between 1.3811 and 1.3790, we could be looking for our next support. And if at any point in the future we see a breakdown of that blue-shaded area and that blue trend line, we’ll look for the continuation lower for the EURUSD.
So, now that we see all that on the Daily Chart, let’s go ahead and take it down to the 4-Hour Chart. And of course we could see the green-shaded area there on the 4-Hour Chart. We could see the blue-shaded area here. There’s the red trend line. Let me zoom it out one time so we could see the length of that red trend line. Staying within or under the green zone, we’ve already outlined we would look for it to go back down. If it opens and closes above the green zone, we look for it to continue back to the purple-shaded area, into the 1.3900s.
Blue-shaded area, of course, over the past several days, has held as support. Let me move that back up here and move this arrow over here. Any breakdown of that blue-shaded area, we look for it to go lower. So, again, yes, we are seeing a big blue candle, big bold candle right now, but until it opens and closes, clearly breaks 1.3870 – the top of that green zone -, I’m not trusting this bullish price action. And Forex Black Book is showing us a red trend bar with a red arrow, but the bank flow levels of the past week and a half – 12/13 days – have shown bearish sentiment. Also, we can see the bank flow levels. Accumulation of sell orders sitting above the market. Even yesterday, we saw the market find resistance into the green zone. The bank flow levels pop up, giving you confidence in the sell orders that are taking place and it went back down.
So, if we see today’s bank flow levels in a similar area along the green zone, like they have been for the past 12 days or so, then we have a high confidence of sellers still in the market, pressuring this to go back down. If, for whatever reason, it breaks the green zone, those sell orders, the bank flow levels are breached, then we’re likely looking for a continuation of the uptrend. So, for the day today, wrap all that up. As long as it holds underneath 1.3870, the green zone, the bank flow levels, and the red trend line, we look for selling opportunities. It could be with a new red arrow with the Forex Black Book, or it simply could be a sell into resistance. You target the blue-shaded area. Anything under the blue-shaded area, further profit as it goes back down.
If you’re looking for a buy today, it either needs to go back to the blue-shaded area, like it did yesterday or over the past several hours, or break above the green-shaded area for the EURUSD today.
