Want FULL ACCESS To
ROSS’ DAILY TRADE ROOM?
Simply Click The Get Started Button Right Now!
Transcript of Video
Click Here to receive an email alert when Ross posts a new daily video
I’m going to get started today on the Euro versus the US Dollar [EURUSD]. Starting here on the Daily Chart, there’s two different trends that we want to take a look at. First off is the previous uptrend, left-hand side of the chart. Two identifiers that we have here, talking about the trend, first off, is the blue trend line, coming up from the bottom. If I just scroll the chart backwards just a little bit, you could see where that blue trend line starts all the way down here, last June of 2013, all the way back down there into the 1.2700s, pushing all the way up to the top of the chart, just shy of the 1.4000-level.
That’s our first identifier of the previous trend. It’s the blue trend line. Second identifier is the 100-day or 100-period simple moving average here on the Daily Chart, and that’s the green line you see. And as the market was above that green line, it tended to trend higher. As you can see, it continued to pressure, again, all the way up towards the 1.4000-level. Now, bringing it back to current time, taking those same two, typical trend identifiers, first off, the moving average, clearly several weeks ago, we broke underneath that green line and underneath that moving average and have been trending slightly lower ever since.
The other thing was, of course, we broke through that blue trend line and continued that bearish action. So, several weeks ago, breaking underneath both the 100-day and the blue trend line. In most recent days, we’ve attached a new trend line here to the chart, showing that bearish price action, and that’s the red trend line. So, as long as it’s underneath the blue trend line, the red trend line showing the lower highs that we see here and the green moving average line that we have here on the chart, there trends to be a bearish bias here for this currency pair.
Interesting. Out of all of those indicators of a down trend at this current point, we have one indicator pointing bullish, and that’s the Forex Black Book, but I don’t think that that’s really the truth of what the trend is. Not because the Forex Black Book indicator has it wrong, but it’s the period that we’re in. As you could see, it was red here as it was clearly moving lower. Clearly moving lower here. The trend bar was red. Now that it’s in a period of indecision, hasn’t continued the downtrend, hasn’t turned into an uptrend, there’s a bit of confusion with the trend. We haven’t broken through the pink-shaded area to go lower. We haven’t broken through the blue-shaded area to go higher. That’s why we’re seeing this trend bar turning green.
It is dark green of course, and that does show us there is that confusion in the trend, where the longer-term trend is showing bullish and the shorter-term trend is showing bearish. There is that confusion in the trend. That’s why it’s that darker green color. So, I don’t think that this is wrong. I just think it’s because of the state that this currency pair is in, bouncing between the pink and the blue-shaded area for the past several weeks. Clearly if this was to continue in the direction of the down trend line, the red trend line, break through the pink-shaded area and start to head down towards the green zone, I believe this trend bar would easily turn red and we’d start to see the continuation of a downtrend.
So, at this point, I’m going to evaluate this as a downtrend or bearish bias for this currency pair, given the red trend line, the moving average, and the break of the blue trend line several weeks ago. So, if that’s the state of or the bias for this currency pair, then we’re looking for opportunities to trade in the direction of that trend bias, which of course would be sells into resistance or breaks of support. That’s the easiest way to find the lowest risk, highest reward opportunity; is to keep that in mind. If you’re selling, you’re selling resistance or a break of support.
The other side of course is if you’re looking for a buy scenario into support, and that’s what you’re doing. As it’s testing here into support, that becomes a buy scenario or the break of resistance. So, at this point, a downtrend, selling resistance or break of support is what I’m going to focus on here at the beginning of the week. So, let’s zoom in here on the Daily Chart. Let’s put a couple of arrows here. Of course selling resistance, at this point, for me, would be back all the way into the orange-shaded area and the red trend line. That’s all the way into the upper-1.3500s. 1.3575 or so would be that orange-shaded area.
Now, over the past few days, we have seen, today included, four days now finding support here into the low-1.3500s. We’ll call it 1.3520. I could probably move this line down just a little bit into this area, and you could see it right around 1.3520, 1.3525. That’s where we’re holding as our congestion right now. Clearly a breakdown underneath 1.3520, 1.3484 becomes our next support. That’s the bottom of the pink zone. I could probably move that up just to connect with that last support tick low that we see right there. Remember, if we’re trading a bearish bias, a break underneath there, we look for it to continue lower. So, at this point, that is our support.
Let me put one more arrow here. It doesn’t mean that necessarily I would take a buy, but if you do, I think it would be justified. It doesn’t necessarily mean I would take a buy, but right now we’re finding support into the pink zone, between 1.3490 and 1.3525. That’s our support zone. Staying within or above it, potential to rally back to that orange-shaded area. If we can finally see this breakdown underneath this zone of support, underneath the pink zone, that becomes our opportunity for it to continue lower.
So, when do you sell it? If you’re looking to sell it, when do you sell it? Do you sell it now? I don’t think so. I think what we’re looking for is a clear breakout underneath the 1.3500-level. I would like to see a clear, single candle body open and close underneath 1.3500, basically underneath that pink-shaded area. Then that increases my confidence that I’m looking for it to continue lower. So, an open and close under the pink zone increases confidence of a continuation lower. Then I’m looking for further clues to get in. Maybe a rally underneath the pink zone as resistance at that point. So, this what is support right now would become resistance after it breaks out underneath, so that might be our rally underneath resistance and underneath the pink zone for another opportunity.
Now, if you see the open and close underneath and you simply take a sell, I don’t think that’s not justifiable. I think it’s definitely an opportunity that you could take. So, two things you’re looking for. A rally back to resistance, which would be to the orange-shaded area or underneath the pink-shaded area after a breakout, or just simply the breakout, open and close under the pink zone could give us our opportunities to sell this in the direction of our trend bias. Then, over time, we look for a continuation down to the green zone.
One last thing before I move on here. Fibonacci of the previous uptrend. Remember that blue trend line on the left and Fibonacci of that longer-term uptrend. Interesting here. Puts the .382 right at 1.3520, top of the pink zone of that pervious uptrend. Let me zoom out one more time. You see that blue trend line on the left. .382 of that longer-term trend on the left-hand side is the top of the pink zone. 50% is the green-shaded area, so that becomes our next target for the EURUSD, and that is the green-shaded area.
Take it down to the 4-Hour Chart. It doesn’t change any of that, but it just gives us a little bit of a zoomed in view here. You could see the market holding right here, around the 1.3520-level. Clearly a breakout lower, we look for it to go down. We do have a couple of green arrows here. We’re very close to market open still, but we do have a couple of green arrows with the green trend bar. If you decide or have already taken a buy here, you’re targeting back to the orange-shaded area for your resistance. Just be cautious here because a breakdown of the pink zone, your risk or your stop placement for any buys that you’re in should likely be just underneath 1.3490. That way, if it does continue to breakdown towards the green zone, you’re not riding that losing trade.
So, just be cautious. It doesn’t mean don’t be in it. Just be targeting the orange zone. Your risk is under the pink zone for any buys that you might be in today for the EURUSD.
