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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, we could see that this currency pair has been in an up trend for quite some time. We go all the way back to the beginning of July, where we saw the first leg of the trend rising from the 1.2700s all the way up here into the 1.3400s, into this purple-shaded area. Found some resistance there, into historical resistance, and it began a retracement as it fell back down to the bottom purple-shaded area into the 1.3100-level.
And then the second leg of the up trend began, as we climbed from that 1.3100-level all the way up here into the mid-1.3500s. Now, for the past two weeks or so, after we saw the spike higher on FOMC a couple of weeks ago, we’ve seen the market consolidating underneath this blue-shaded area and finding resistance here for quite some time. And that blue-shaded area goes between the 1.3520-level and the 1.3560-level. So, we have about a 40-pip range that we could see the market has been holding as resistance for the past two weeks. Dipping down to the bottom of the consolidation, we go all the way back down here into the 1.3470-level or so. You could see the supports over the past same two weeks finding support, so the consolidation persisting here for the EURUSD.
Well, your best way to find low risk, high reward scenarios over the past two weeks for the EURUSD have been selling towards the top of that consolidation or into the blue-shaded area, or buying towards the bottom, into the little pink-shaded area that I have highlighted here, into the 1.3460-level. Those provide your lowest risk, highest potential reward scenarios or trading opportunities, and they have been that way over the past two weeks, knowing that the risk in this entire situation – the risk of losing – is a breakout of this consolidation.
Now, of course, we can’t be for 100% sure which direction it will break out. It could break to the top of that blue-shaded area and continue to the next resistance, which is the yellow-shaded area into the mid- to upper-1.3600s. That’s one potential scenario as a breakout of consolidation, or it breaks underneath the 1.3470-level, underneath these supports and continues to be bearish, pushing back down to the purple-shaded area, into the 1.3400-level. Now, either way is a possibility. So, for the day today, until we see that breakout, we’re going to continue to focus our efforts inside the consolidation.
So, that being said, let’s take that information down the 4-Hour Chart and note the fact that we are closer to the resistance, or closer to the top of that consolidation or, as we look at it here on the 4-Hour Chart, looks somewhat like a range. A range holding between resistance in the blue-shaded area and support into the pink-shaded area, just underneath the current market. So, that being said, your best opportunities, as as we still continue to hold inside this consolidation, is for selling towards the top or buying towards the bottom. We’re closer to the top, so that becomes your closest opportunity today.
Now, the higher you can get inside that blue-shaded area, between the 1.3520-level and 1.3560; the higher you can get inside this blue-shaded area of course minimizes or reduces the amount of risk, because your stops become smaller and your profit targets back to the pink or the purple-shaded area as support become further away. So, the higher you can get, the better, watching for a clear breakout. What’s going to be a signal for me of a breakout above the 1.3560-level and that blue-shaded area would be a clear open and close candle body – single candle body above that blue-shaded area.
Until I see that, I still think there’s potential for us to continue to find resistance and consolidate underneath that resistance. A break, same thing goes down into the pink-shaded area. If we see an open and close clear-candle body underneath the pink-shaded area and the 1.3470-level, then we likely look for it to continue lower. Now, I’ve taken two Fibonacci measurements here on the EURUSD, and let me go, one more time, back out to the Daily. I want to show you where those fibs come from.
One is from the lowest low where the black X is down here at the bottom of the blue trend line. From the lowest low to the current high up here at the top of the chart or top of the trend. And from the low here in the middle to the top of the trend. So, basically from these last two lows to the current high on both of those lows define the Fibonacci retracement level for the EURUSD. Now take that information down to the 4-Hour and we could see the .236 fib of the shorter range sitting here at 1.3470. That’s that pink-shaded area where we’re currently finding support.
The next area that we see Fibonacci from both of those ranges – shorter and longer – sit down here into the purple-shaded area. So, any fall off the blue-shaded area, we target the pink-shaded area. A break under the pink-shaded area, we’re going to target back to the purple-shaded area, into the 1.3400-level, where we see those two Fibonaccis overlapping down here, just into that purple-shaded area. The other side of the story of course would be a breakout above the blue zone likely looking looking for it to push all the way back to 1.3640s or 1.3650s into the yellow-shaded area at the top of the chart.
The trend bar for the Forex Black Book today is the dark green color, so not really confidence in the trend bar today. If it was a bright green or a bright red, that gives us a little bit further confidence, but it’s the darker color, so it’s more likely that we’ll wait for that to change to a bright color before we have confidence in that indicator. Yesterday’s bank flow levels sat just on top of the blue-shaded area, as they have for the past two weeks. As long as they sit on top of that blue-shaded area, it’s giving us an indication of the sellers looking to cap this currency pair and keep it from rising higher over the next several days for the EURUSD.
