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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. I’m going to start here on the Daily Chart and get an overall view of this pair. For the past several months, we go all the way back down here to the bottom of the chart, into the mid-1.2700s. Back in July, we started the uptrend. It hit the lowest low and started moving higher. A little bit of a pullback here in the middle of the chart and, most recently, over the past few months, we’ve seen a challenge of the highest highs in October, into the low-1.3800-level.
Then we saw a pullback, a new leg of the uptrend pushing right back up into the 1.3800-level to challenge that high. Over the past several days, we’ve been sitting underneath that green-shaded area and underneath that last resistance high. Now, yesterday we saw a little bit of a change in the pattern, where we have seen an uptrend. Higher highs and higher lows. We see the market now pushing back down to challenge the most recent uptrend line. We could see that red trend line coming from the lowest low here that we’ve seen most recently into the 1.3300-level. The red trend line coming up. Higher highs. Higher lows. And we’re now challenging that red trend line today.
Follow that pink-shaded area backwards in time. We’re looking right here into the upper-1.3600s. Follow that pink-shaded area backwards in time to the left-hand side of the chart. We see historical resistance back here where this orange circle is on the left-hand side of the chart. This orange circle – that resistance now helping us identify this as support. On the way up even within this uptrend back here, we see some hesitation into that pink-shaded area right here into mid October. So, some hesitation here for a few days. Some resistance back here. So, there’s an expectation of support here along with the bullish trend line.
Also, taking Fibonacci from the most recent low here into this 1.3300-level to the most recent high, we find the .236 fib right at 1.3688 – the top of that pink-shaded area. Now we’re a little bit underneath that today, but if today gets right back on top of it, that will still satisfy us as a support here into this pink-shaded area. So, this will be our critical decision zone today. Holding within or back above this pink-shaded area and back above 1.3688, we likely look for another turn in the direction of the trend and possibly another challenge of the most recent highs. If the market continues to be bearish, breaks underneath – we’ll call it – 1.3659, 1.3660, and underneath the red trend line and pink-shaded area, we’ll look for the continuation back down to the .382 fib, into the 1.3613-level and this yellow-shaded area that sits just below the current market.
All right. Now that we’ve seen that overall view, let’s take it down to the 4-Hour Chart. And again, there is our red trend line coming up from the bottom, representing this most recent trend. We could see higher lows and higher highs within that trend. There’s the .236 fib from this same trend range, sitting at 1.3688. We’re just underneath that right now. Take a look back. Follow this pink-shaded area back and basically 1.3655. Follow it backwards in time and take a look at this support that we saw back here. On the way up, it broke above the bottom of the pink zone, settled down on top of it as support before continuing the uptrend. So, it’s not too hard to see that this price level here into the 1.3650s is very important for the EURUSD.
So, what we’re looking at today, and let’s go ahead and put our arrows in here. As long as it holds within or breaks back above this pink zone, we could be looking for it to go back up to the blue-shaded area at least or higher. The blue-shaded area, of course, represents our last support low that we can see here on the 4-Hour Chart. These support lows here. So, back above the pink zone, we’re back into the mid-1.3700s and the blue-shaded area. Underneath the pink-shaded area and breaking underneath the 1.3650s, we’ll likely look for the push back down towards this yellow-shaded area, which is back, again, into the .382 fib of this same previous uptrend leg, into the 1.3600-level.
So, we’re looking for a breakout of this pink zone today. Now, if you took a sell at any point yesterday on the rally back towards the bank flows yesterday or a test into the green-shaded area, then of course you’re protecting profit. You should be moving your stop to protect profit and you’re waiting for that breakdown of 1.3650 to continue down to the yellow zone. That’s assuming that you sold it. If you didn’t sell it yesterday, I don’t think right now is the time you want to sell it. You want to wait for it break underneath 1.3650 before you look for a new sell today underneath the pink-shaded area. That became an opportunity.
Now, if you’re looking to buy this currency pair, of course in the direction of the most recent trend, then this becomes a spot in which you’ll look for support, the pink-shaded area, a push back above 1.3680, and you’ll look for the continuation back to the blue-shaded area. If you’re looking for your lowest risk, highest potential reward for a buy scenario today, you’re there right now, because your risk is that it breaks under the pink zone and continues to the yellow zone. So, your stop placement is on any buys that you might take here into the 1.3650s and 1.3660s; is just underneath here. That way, if it breaks, you’re out of any buys and you take a lower loss than you would if it continues down towards the yellow or maybe even the green-shaded area.
Now, if you’re in a sell or looking to sell it, especially on a breakdown of 1.3655, underneath the pink zone, your stops will likely go back above 1.3688 and above this pink-shaded area, because if it breaks underneath it and you start to sell it, you don’t want it to get back above it. If it stays above it and you buy it, you don’t want it to break underneath it. So, this is your lowest risk scenario right now. Waiting for a break out of the pink zone and your stop goes on the opposing side, whether it’s above to go higher or below to go lower. Right now, with the bearish action we’ve seen since yesterday, I might be a little bit more inclined to wait for the breakout underneath 1.3655 and the continuation of the bearish movement we’ve seen since yesterday, but I also am reasonably expecting that we could find support here and potential to turn right back up and go back up in the direction of the overall trend.
So, to be safer here, we could even take this down to the 1-Hour Chart. And if we take it down here to the 1-Hour Chart, you could see the market, once again, holding inside this pink-shaded area. And your expectation that if you’re going to sell it is that it needs to break down underneath the current supports. Take a look back here to the left-hand side. And in fact, I’m going to pull this down to about right here right at 1.3655. Drag that over here like this. So, 1.3655. A breakdown underneath there, open and close, which we have not seen. Even going back to the early part of December, the left-hand side of the chart, no clear body open and close underneath 1.3655. So, an open and close underneath there, we likely look for the continuation down to the yellow-shaded area. And of course the same thing on the topside. A break above 1.3688, look for the continuation and a reversal of this downward movement. I think right now at least I would be leaning towards the sell side with the bearish movement we saw beginning from yesterday here on the EURUSD.
