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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. But before I begin today’s analysis, I would like to take a moment to invite you to join me in today’s live Trade Room at 10AM Eastern time, where, every day, I walk through each of the currency pairs in detail and answer any questions that you might have during the Trade Room. Now, I will post the Trade Room link on Twitter today just before the 10AM hour. If you’d like to join me, you can find me on Twitter at @YourDlyAnalysis. That’s the username that I have on there.
All right. Starting with the EURUSD today, of course over the long-term, we have seen an uptrend for this currency pair. You can see it starting all the way back into the mid-part of 2013. It’s been moving higher ever since, pushing all the way into the upper-1.3900s. Now, over the past few weeks, we’ve seen a little bit of a hesitation. The uptrend hasn’t continued. In fact, we can see a new lower high along the red trend line.
I’ve placed a red trend line connecting the last two highs that we see here, and we could see that we have a lower high. But we still do see lower highs within the uptrend, so we have some contraction here, where we see higher lows and lower highs. And the question is: which side of the market is going to win? Are the buyers going to win and it’s going to push back higher and continue the long-term uptrend, or are the sellers eventually going to take control, it pushes through the trend line, and we see a change in the trend?
Well, we can’t know that for sure, but we can finder lower risk, higher reward opportunities just in case one of those sides takes place. Well, it’s my expectation that as long as it stays underneath this red trend line and underneath the last high that we can see here right around the 1.3900-level, then I’m looking for sells on rallies into resistance and the potential for at least a fall back to the yellow-shaded area and the blue trend line that we can see here. If it breaks above the green zone and above the red trend line, then of course that’s the risk on any sell trades that we take and we’ll likely look for it to continue to pressure higher.
So, when we’re looking for lower risk, higher reward opportunities, selling on rallies into resistance or buying on dips into support, which, again, would be down here to the yellow-shaded area, become our obvious opportunities for this currency pair or any currency pair. The blue-shaded area has, over the past two or three days, held as support. We can follow that blue-shaded area back in time. We see resistance here into early April. We can see some resistance here into February, resistance back here into December of 2013, and resistance back here into October.
So, the blue-shaded area has held as resistance multiple times. That’s helping us identify this as support. Yesterday, in the Trade Room, we discussed that if it could break down through 1.3800, we of course would look for it to push down here towards the yellow-shaded area and the blue trend line. It didn’t do it. Now we see the rally back into resistance, giving us a second opportunity. If you didn’t already take a sell, another opportunity to look for a sell into the green zone, with your risk, of course, just above the red trend line. That way, if it breaks above, we look for it to continue to pressure higher. I don’t want to buy it as long as it sits underneath this resistance.
Follow the green-shaded area back in time. You could see this support back here. You could see some resistance here. You can even see a spike high over here on the left-hand side of the green-shaded area. So, as long as it stays underneath there, I’m not really looking to buy it because it’s likely to find resistance. I would only look to buy it on two reasons: a dip to support or a break above resistance.
If take a look at the bottom of the chart, we could see that the Forex Black Book trend bar is red, which gives us a little bearish bias for the currency pair and of course along the red trend line, we can see that it has been going back down. Of course if we wanted to buy this, the best opportunity to buy it would be back down here towards the blue trend line. So let’s go ahead. Zoom it in here a little bit on the Daily Chart. Get a little closer so we could see all those highlighted and shaded areas.
Let’s put a few arrows on the chart. A dip down to the yellow zone clearly becomes a potential support for the EURUSD. A rally back into the green-shaded area becomes resistance. As long as it stays underneath this red trend line, I expect resistance into the green-shaded area, and we’ll look for opportunities to sell on rallies into resistance. If it breaks above the red trend line and the last high that we see there, of course we’ll likely look for a challenge of the highest high into the low to mid-1.3900s. The purple-shaded area. And of course above there, we’ll look for a continuation of the trend.
At this current point, if I’m looking for a sell, the green zone, or as we talked about in the Trade Room yesterday, a break underneath 1.3800 and underneath the blue zone gives us a selling opportunity. I don’t think we are at a buying opportunity right now. I think a push down to the yellow-shaded area would give us our best buying opportunity, or of course the break above the red trend line.
Let’s go ahead and move all that information down to the 4-Hour Chart. And as we get down to the 4-Hour Chart, we’ll be able to see all of those highlighted and shaded areas again. If you were in the Trade Room yesterday, we spoke about the blue-shaded area with the supports that we saw there and if it would’ve opened and closed under the blue zone, we would’ve expected that continuation back down towards the yellow-shaded area and into the mid-1.3700s, which it didn’t do. It did rally back to the green zone.
Well, very interesting. Right there into the green zone, which we looked at during the Trade Room yesterday also, are yesterday’s bank flow levels. We could see the orange line. It’s maybe a little bit difficult to see right here at the bottom of the green-shaded area. At 1.3847 was our bottom bank flow level. So, if you took a sell into yesterday’s bank flow level, the 1.3847-level and the green-shaded area, you’re now sitting with a little bit of profit. Nothing extraordinary yet, but we have seen some resistance into the bank flow and into the green zone as expected.
If you’re in a sell now, you’re looking to target back to the blue-shaded area as your potential target. And I might even move this blue-shaded area down just a little bit. Just squeeze it in just a little bit to give us a little clear area of support, looking back at the resistance, support, and congestion back here on the left. So, we’re a little bit lower down here. 1.3817 becomes a target for any sells that you’re at. That’s about 15 to 20 pips lower than current market. And of course as I’ve mentioned earlier, a breakdown of the blue-shaded area, we continue to target back down to the yellow-shaded area.
So, sells on rallies into resistance. Yesterday’s bank flow levels. And of course during the Trade Room today, we’ll take a look at today’s bank flow levels to see if they match up with that same green-shaded area as resistance for the EURUSD today.
