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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. Starting on the Daily Chart, we could see that the previous trend was an uptrend. We see higher highs and higher lows along the blue trend line. We even see a rise in the 100-day moving average. It’s the green line that you see here on the chart.
Now, over the past several days in the Trade Room, we’ve been studying the breakout of that trend, where previously higher highs and higher lows have now turned into lower highs and lower lows. As we saw several days ago, the breakout underneath the blue trend line. That was our first clue. Second clue was the breakout underneath the 100-day moving average. That was the next thing we saw that gave us a clue that we could be looking for a change of the trend.
Now, we’ve also seen, over the past few days, a breakout and a new low being made. When I talk about that, I’m looking back here at these last two support lows. This low here, where the moving average and the trend line came into contact here, and then you go back a little bit further and you could see a similar low right there in the pink-shaded area. So, if you follow that pink-shaded area back, you see low, low, or support and support, resistance, and even some congestion back in time. That became our support, but once the market broke underneath that. That now becomes resistance.
So, we continue to see lower highs and lower lows being created here. If you look at the very bottom of the chart, you could see that the Forex Black Book trend bar is also red, giving us a bearish indication of the trend. So, we have the Forex Black Book bearish, we have a break underneath the trend line, and a break underneath the 100-day moving average. All of those giving us a bearish expectation for this currency pair.
So, when is it do you enter in that direction? When do you sell it? Well, typically the best opportunities to sell are going to be rallies into resistance because that provides a lower risk, higher reward scenario. If you sell it as it sits into support, there’s the risk that it finds support and bounces back up, and has a little bit of retracement. So, what we want to identify are our resistance levels that help us identify lower risk, higher reward opportunities to sell the EURUSD today.
Let’s go ahead and zoom it in now here on the Daily Chart. Get a little closer to the market. You can see we have resistance here in the pink zone. These historical supports here into the pink-shaded area now become resistance. We can also see some Fibonacci here from the previous uptrend. We broke underneath the .618 fib at 1.3673, and now that helps us also identify resistance. We can also see resistance back up towards the 100-period moving average and the 50% retracement level of the previous uptrend sits there into 1.3734 here for the EURUSD.
One other thing that I want to do here is take Fibonacci from the highest high, down to the current low. Highest high to the current low also puts the .236 fib right here into the pink-shaded area, matching up with the historical supports into that pink zone. The .382 actually sits right here into the yellow-shaded area, where the moving average also comes into play. So, those two levels will give us our highest probability selling opportunities, at least for the day today, if not going into tomorrow or even next week.
The other opportunity to sell this, if it doesn’t make that retracement higher, would be the break of support. And we can see that support right now is highlighted in the orange-shaded area, right around the 1.3585-level. You follow that orange-shaded area back in time. We could see some history of support into that orange-shaded area, into the upper-1.3500s on the left-hand side of the chart. So, let’s go ahead and put a couple of arrows here on the chart. Give us our expectations.
Of course we’ve already talked about resistance into the pink zone. That would be into the 1.3660 to 1.3690-level. Somewhere in that pink zone, I would expect a rally into there. We’ll find resistance today and the potential to fall back down. If it’s able to breakthrough that pink-shaded area, our next area for resistance would be the yellow zone where the moving average comes into play. So, selling on rallies into resistance become the pink zone or potentially the yellow zone, using appropriate risk strategies at those levels. The only other opportunity to sell this, I think today, would be a breakdown underneath this support. An open and close underneath the 1.3585-level gives us confidence it’s going to continue for resistance.
The bank flow levels from the past two days have been in the pink zone. We have some Fibonacci into the pink zone. We have historical support and resistance into the pink zone. I think that’s the most identifiable area to take a sell on rallies into resistance today for the EURUSD.
