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 begin the day today on the Euro versus the US Dollar [EURUSD]. I’m going to get started on the Weekly Chart and take a look at some historical perspective here for this currency pair. Go back to the left-hand side of the chart, where we could see this previous downtrend on the left-hand side. Starting all the way up here into the mid-1.4900s, it fell all the way down over a several month period, down into the lowest low here into the 1.2000s. And then we saw the beginnings of a reversal as the market pushed back up here into the 1.3700s. A little bit of a pullback and now, in most recent weeks, we’ve seen it coming back up here into the 1.3800s.
Well, what’s most interesting about this previous downtrend is taking Fibonacci from the highest high down to the lowest low. Using the Fibonacci tool, measuring that with Fibonacci, we find the .618 Fibonacci retracement level at 1.3831. And that happens to sit right at the top of our most recent highs; is that .618. If I zoom in a little bit here on the Weekly Chart, you might be able to see that a little bit better. There’s the .618 sitting on the far right-hand side of the chart. The dashed line of that Fibonacci level actually sits underneath that black line, and that’s right there along that top green-shaded area.
So, you follow that backwards in time. History has shown some evidence of resistance and support along that green-shaded area, back here on the left-hand side of the chart. We can also see some resistance here going back into October, the fallback, and now, over the past four days, again, finding resistance underneath the 1.3800-level. And it’s my expectation that as long as we hold underneath there, there’s potential reversal that could change the pattern of the trend. If it breaks above there, we’ll look for a continuation of the trend. A continuation above 1.3800 likely pushes back into the 1.4000-level and we can see evidence of that all the way on the left-hand side of the chart. We could see where it broke above the green zone and pushed all the way to the purple zone before reversing again.
So, that 1.4000, 1.4100-level becomes our next target above 1.3800, but as long as we stay underneath there, there is potential for reversal. So that’s what we’re going to be watching for; are clues to reversal. Evidence of reversal. Candlestick formations and patterns that might imply a change in the trend or reversal. Let’s go ahead and take that information down to the Daily Chart. And of course over the past several days we have seen the market pushing higher within an uptrend pattern. We saw some buyers take a little bit of control for a period of time last week, where the market pushed all the way up here into just shy of 1.3900, right up into the 1.3890s, and then the sellers swiftly came back into market and drove it back down underneath that same .618 fib from the Weekly Chart at 1.3830.
So, again, as long as it stays under that green zone, there’s potential for the market to have a little bit of a pushback. Find resistance into the green zone and push back. Remember: higher highs and higher lows help us to find a trend. That’s the pattern of the trend. We could see that along the black trend line. Higher highs and higher lows. If we’re going to see a change in that pattern, we’d look for a change of the resistance and support. And so, right now what we’d be looking for is a new lower high or a new lower low to help us identify a change in the trending pattern. As long as it doesn’t do that and we continue to see higher lows along the black trend line, then we’re still within the pattern of an uptrend. So, right now it wouldn’t be a consideration that we’re expecting to see a downtrend because we have not broken through the lows.
So, as long as it stays above this black trend line, there is potential to challenge the 1.3830-level again, the green-shaded area. A break, open and close, above 1.3830, we’ll likely look for the continuation of the uptrend. And of course, as I mentioned, as long as it stays underneath, there’s potential for bounce back like what we’ve seen. We are in the waining days of the year – last two days of the year, so there could be some increased volatility, lower liquidity. So just be cautious if you’re looking for new trading opportunities, but your lowest risk, highest potential reward opportunity to sell as a potential reversal will be as close as possible to that green-shaded area – 1.3800 to 1.3830.
If you’re looking to buy it, of course you’d want to buy into dips into support. Buying on dips towards the black trend line as close as possible to the black trend line could be the blue-shaded area. Could even be just underneath that into the pink-shaded area, but buys on dips into support become your opportunities to buy, looking for the market to continue the uptrend. The other side of that is if it doesn’t dip into support. We likely look for the break of that 1.3830-level for a continuation higher.
Let’s take all that information down to the 4-Hour Chart, as we begin to get a little bit closer perspective of the currency market. And there is that green-shaded area at the very top and, again, as long as it stays underneath it, potential lower risk, higher potential reward opportunities to sell. We’ve already seen that spike higher last week. Again, the buyers took temporary control and drove it higher above the 1.3830-level, swiftly came back in – the sellers – and drove it back down. Again, that same green-shaded area now presents an opportunity for resistance. A lower high from last week’s high. If it ever breaks above the 1.3830-level, again, we’ll look for the continuation to go back up again.
We’ve already seen, over the pasts several hours, the market finding support into the blue-shaded area. As we could see, that dip down here, support into the 1.3730s, and now coming back up into the 1.3770s. If any push underneath there today, we likely look for the challenge of the black trend line and the pink-shaded area into the 1.3670s. So, for the day today, these black arrows will give you opportunities. Now, I’m not really confident enough into the 1.3770s – this black line that sits here – to call that an opportunity to trade it, but if you’re looking for short-term opportunities, you might even take this down to the 1-Hour Chart or lower. Look for 1.3770 – that black line that sits right there. A break above there, we look for the challenge of the green-shaded area.
There’s about 30 to 35 pips before it reaches there. It could present an opportunity to buy towards the green-shaded area if it breaks above 1.3770. I’m not really confident enough to say sell it off of there because I think your risk is much too high above the green zone and the support is too close, but potential buying through 1.3770 to go back towards the green zone. But I think the best, safest opportunities will be here where the shaded areas are. The green-shaded area for sells. The blue or pink-shaded area for buys. And a breakout above 1.3830 looks for the continuation of the longer-term trend.
We could see our last bank flow levels that we received for this currency pair sitting just into that spike high. We have no buy levels down here. We have not had buy levels for quite some time. It could be a sign of things to come with resistance into this green-shaded area. As long as it holds under the green zone, the bank flows hold here. I expect we may be looking for some resistance. The closest possible sell or the best possible low risk, high reward sell opportunity, I believe, will come if the market challenges about 30 pips higher, into 1.3800. Look for opportunities to go short there and look for it to go down. Otherwise, potential buys in the direction of the trend present opportunities at each one of the shaded areas or a breakout of resistance for the EURUSD today.
