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I’m going to begin the day today on the Euro versus the US dollar [EURUSD]. First off, here, on the Daily Chart, we could see a couple of different trend lines that we have here on this chart. First off, the longer trend line connecting with the last two long-term lows that we could see coming from the bottom of the chart. We’re well away from that trend line; not really part of our trading scenario today.
The shorter trend line coming from the last low that we see here, connecting with the low before the high is part of the trading scenario, and we could see that over the past couple of days we’ve been challenging support on top of that trend line, and then, over the past 24 hours or so, we’ve seen a breakdown of that trend line and a continuation through the current support. Follow this blue-shaded area back in time. Of course, over the past three days or so, we have seen support on top of that blue-shaded area.
We could follow it just a little further back and we could see resistance underneath that blue-shaded area, and then, of course, following it back to the left-hand side of the chart, we could see an area of congestion back here on the left. So, we knew that this zone here between the 1.3545 and 1.3560-level – the blue-shaded area – was support over the past few days. And the expectation was, as long as it stayed under the blue trend line and broke under that blue-shaded area, we’d see a surge lower as it attempted to get down to the next area of support, targeting this level down here into the 1.3470s, which is this pink-shaded area.
Of course, as it reaches the pink-shaded area, the same will be expected down here. Just like on top of the blue zone, we’ll expect some support on top of the pink zone. If it finds support there, could even be a place where the market turns back in the direction of the previous long-term trend and goes back up again. So, we’ll want to pay attention to this pink-shaded area. And of course, underneath that, we’ll likely look for it all the way back down here towards 1.3400, into the purple-shaded area and these last two resistance highs.
Let’s go ahead and zoom it in a little bit here on the Daily Chart so we could see this a little bit better. And of course there’s that blue-shaded area. The historical resistance. The support we’ve seen over the past couple of days. Yesterday’s candle, here, on the Daily Chart, and I’m actually going to zoom it in one more time. Yesterday’s candle – the daily candle from yesterday – was the first candle we see that had a full open and close underneath that blue trend line.
We could see the open at the top of the red candle was under the blue trend line. The close at the bottom of the red candle was underneath the blue trend line, giving us a higher degree of expectation and confidence that we’re looking for it to go lower. Now it’s broken through that blue-shaded area and our current support. So, if we’re looking to buy this currency pair, we of course would want it to go lower and find support. Right now, here, in the middle of this zone between the blue and the pink-shaded area, where we’re in the middle with no real clear support in this area, it’s not really an opportunity to buy it.
Now, if we’re looking to sell it, the other opportunity is to look for a rally back into resistance. So, it’s my expectation today that what looking for is as it comes back or if it comes back up underneath this blue-shaded area and finds resistance again like it did over here on the left-hand side, we’ll be looking for resistance under the 1.3545 to 1.3560-level to give us an opportunity to look for a new sell. Remember: buy low, sell high. So, if you’re looking to sell it, selling on a rally into resistance becomes your lowest risk opportunity. Knowing that the risk in that scenario is that if it breaks back above that blue-shaded area, we’re likely turning back in the direction of the trend and continuing back to the highest highs into the yellow-shaded area.
So, selling into the blue-shaded area is a likely opportunity today with stops just above the current highs and this blue-shaded area. If you’re looking to buy this, I don’t think you want to buy it right now, sitting out here in the middle of no man’s land. I would expect I would be looking for it to challenge back down here towards the pink-shaded area before I look for support today, or possibly even lower down here towards this purple-shaded area, which comes closer to the longer-term trend line.
Let’s take a look at some Fibonaccis here on the daily chart before we go down the 4-Hour Chart. First off, I’m just going to take Fibonacci of this current trend range from the beginning of the trend to the end of the trend. We could see the .236 fib sitting here at 1.3517. That, of course, is providing a little bit of support there into that zone. We could see the current candle sitting there right now into the 1.3500, just above 1.3500. I expect though that if it can continue to get bearish pressure today, we’re like looking for it into this area of support.
We can see one, two, three, four, five, six days back here. The last time we were into this pink zone, finding support into the upper-1.3400s, so it’s highly likely that that’s what we can expect again. That we’ll likely look for support into the 1.3470s and potentially a short-term bounce back up here into the low-1.3500s. Now, of course, knowing that, we also know that if it breaks down underneath this pink-shaded area, looking for the continuation lower.
Taking that information down to the 4-Hour Chart, and let me zoom back out once it refreshes here. Zooming back out, we could see that yesterday we didn’t quite reach into the bank flow levels yesterday. I was hoping for a little bit of a further push into the bank flow levels. We could see the opens and closes underneath the blue-shaded area, finding now, once again, underneath that blue zone. Again, if the current candle – the current 4-hour candle – closes under that blue zone, it gives me higher confidence that that blue-shaded area becomes resistance. So, a close of the current 4-hour candle, a retest back into the blue zone and the 1.3545-level becomes an opportunity to sell it to look to target back down to the pink zone.
Pink zone, of course, becomes our target for support today. If you’re in a sell, that becomes a target for profit. If you’re looking to buy this or at least looking for a intraday hop back up, we would look for it back down there into the pink zone, into the 1.3470s, being fully aware that if the bearish momentum continues and your risk on any buys into the pink zone is that it breaks underneath there and continues lower. So, if you look for a buy into the pink zone, look for a stop just underneath the 1.3460-level and underneath the last lows that we can see here on the left-hand side of that pink-shaded area. That’s assuming you look for a buy.
It’s my expectation today, now that we’ve broken under that trend line, I’m actually going to be preferring to the sell side. As it rallies back underneath that blue-shaded area, I’ll be looking for new selling opportunities for the EURUSD today.
