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I’m going to get started today on the Euro versus the US dollar [EURUSD]. Starting here on the Daily Chart, we could see that this currency pair has been in an uptrend for quite some time. We come all the way back to the left-hand side of the chart, back into July 2013. We could see that the price for this currency pair has continued to rise – higher highs and higher lows – and it pushed all the way up to the top spike high of the chart, into the 1.3890s, close to the 1.3900-level.
Now, in the most recent weeks, since that spike high, which happened on the end of December of last year, we’ve seen a fall and a retracement of the previous uptrend. It’s continued to pressure lower. We’ve now seen lower highs, and I’ve placed the blue trend line to show that our pattern of the trend is changing. We now see a lower high and also a new lower low. So, we see a change in the pattern of the trend. Where over here it was higher highs and higher lows, now we see lower highs and lower lows.
The question is: how long will this continue? Will it continue to break down, pushing down through these historical lows, like this one here into the pink zone or this one down here? Will it continue to pressure lower or will this stay higher than this previous high and we look for a turn back up in the direction of the previous uptrend? Well, we have some speculations here. Of course the black trend line connecting – one, two, three – with three historical lows.
We can see right now we are underneath that black trend line. So that gives us some expectation of bearish or resistance there, underneath the black trend line. We could see of course lower highs and lower lows. We can see that the trend bar for the Forex Black Book is red, giving us all bearish expectations. So, right now we’re looking for selling into resistance. We’re looking for resistance underneath all of these indicators and we’re looking for a breakout underneath the support to continue the bearish movement, because remember lower highs and lower lows is a downtrend.
So, what we’re looking for is a break of support. 1.3475 is the bottom of this yellow-shaded area, where over the past four of five days we have found support. Breaking through there, our next support would be this pink-shaded area. Follow the pink-shaded area back in time. You could see this, of course, major support right here, but also resistance on the left-hand side of that pink-shaded area. Also, just above the current market is that purple-shaded area, where we could see historical resistance and support lined up here into the 1.3560s, 1.3570s, and 1.3580s, and of course the falling trend line.
Let’s go ahead and zoom in here on the Daily Chart. Zooming it in here on the Daily Chart, we could see a little bit more detail. The yellow-shaded area holding as our current support. The purple-shaded area holding as our current resistance. I’ve also taken Fibonacci from the highest high to the current low. Highest spike high to the current low puts the .236 fib right there in the middle of that purple-shaded area, right around the 1.3575-level.
So, .236 fib holding as resistance under the black trend line, under this purple-shaded area, which historically has held as resistance and support. All of that showing that we want to sell one rallies into resistance, looking for the breakout underneath support and a continuation lower in the direction of our current trend and momentum for the EURUSD.
Let’s go ahead and go down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, we can hone this in a little bit. I’m actually going to take this black line and bring it up just a little bit right to the 1.3525-level. We could see, for the most part, over these past several days we’ve found resistance into 1.3525. Again, go back to the left-hand side. You could see support into that same 1.3525-level on the left-hand side. That’s currently holding as resistance.
Yesterday our bank flow levels. Our bank flow levels for yesterday sat right here into this purple-shaded area. We can see them right into the 1.3550s up to the 1.3580s. We could see the bank flow levels. It didn’t quite make it all the way to the bank flow yesterday. We saw a spike get very close to them, and then the market shying away from them. Let me zoom out one time so we could see some more history. There we go. There’s that downtrend. I’ve, again, taken Fibonacci from the highest high to the current low. .236 fib.
So, it’s my expectation – let’s put a couple of arrows here – that as long as it stays under that purple-shaded area and the black trend line, and the .236 fib and the bank flow levels, we’re looking for sells on rallies into resistance, or the other reason to sell this would be a break of support. Those are your two opportunities to sell. Rally into resistance or break of support. So, it needs to go up to the purple zone or break underneath the yellow zone. That gives you two opportunities to sell the EURUSD in the direction of the current trend and momentum – the direction of the Forex Black Book trend bar.
We could see recently we saw a yellow arrow here. Fairly recently. We’ve also seen a green arrow. What I would be looking for with the Forex Black Book would be a new red arrow. Just take a look at where all the red arrows are here on the chart and what happened when we saw those red arrows. Red arrow, fall. Red arrow, fall. Red arrow, fall. So, it would be ideal, of course, to get a new red arrow with the Forex Black Book and a new opportunity to sell it. Rallies into resistance and the bank flow levels give us clear opportunities to sell this, and we could see the market challenging a little bit higher right now, but not quite into that purple-shaded area.
Again, rallies to resistance or breaks of support will be our main focus for the day today, targeting back down to the pink-shaded area at the bottom of the chart, into the low-1.3400s. Of course all of that could change if we see a breakout above that same resistance. A push back above that purple-shaded area, we likely look for a continuation back to the green zone. Green zone becomes our next resistance. That would also be back up here, closer towards this blue trend line. But I think it’s going to take a significant rally higher. It’s going to take a break above the black trend line, purple-shaded area, bank flow levels, .236 fib. It’s going to take a significant pressure higher to push through that zone.
So, for the day today, focused on resistance, looking for it to go back down. The only thing that changes that would be a breakout above the purple zone. We challenge back to the green zone as our next resistance. Happens to be the .382 fib of that same downtrend sitting up there into the green zone. 1.3634. Again, the other reason to sell would be a breakout underneath the support and underneath the yellow-shaded area.
Now, I suppose if you’re looking for a buy opportunity, there are really two buy opportunities. A dip back to the bottom of the yellow-shaded area provides a fairly low risk buying opportunity into the 1.3480s and 1.3490s. Just be aware if you decide to buy down there. The trend is down, the momentum is down, and there’s a high likelihood of breakdown of that yellow zone and a continuation down to the pink-shaded area as your next support for the EURUSD today.
