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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. Starting here, on the Daily Chart, we could see that over the past several months, we have been in an uptrend. Following the blue trend line all the way down to the bottom of the chart, starting down here into the mid-1.2700s, we saw the first leg of the uptrend come here, into the 1.3400-level. A little bit of a dip back down into the 1.3100s, the second leg of the uptrend pushing all the way up to the top of the chart, into the 1.3800-level.
Since capping out here, into the low-1.3800s, we’ve seen a change in that trending pattern. The market has begun to fall. We see the fall all the way back down here, settling out for about four or five days on top of that same blue trend line. From the previous blue trend, we could see the market settling out on top of that blue trend line, on top of this green-shaded area for four or five days. Finally breaking down underneath the blue trend line, we’re now seeing a retracement or a hook back up underneath the trend line as we challenge that same trend line, which was historical support within the uptrend; now acting as resistance, as the market is now underneath it.
Not only that. If we follow this green-shaded area back in time – the green-highlighted zone here on the chart, and I might even widen that out just a little bit. But as we go back in time, we could see, between the 1.3460 and 1.3490-level – that green shaded area -, historically – of course, I’ve already pointed out the supports here for four or five days on top of the trend line. But we even go back even further and we can see supports over here on the left-hand side. So, going back in time, we could see support, which of course helps us identify potential resistance. And of course, that settles out right here underneath, again, that blue trend line.
So, the blue trend line acting as resistance in the current timeframe. For the past five days or so, we are seeing resistance underneath that blue trend line. And as long as it stays underneath it, I expect we could look for resistance and possibility of it going back down. Now, over the past few days, we’ve also seen rising lows, and this red trend line – the short red trend line – represents the retracement that we’re seeing here. The retracement of this previous downtrend. One last thing to look at here, of course, is between the highest high and the current low.
I’ve taken Fibonacci between the high down to the low, and we find the .382 Fibonacci retracement level right here at 1.3501, which is, again, just on top of that green-shaded area, and where the current market is finding resistance. So, we have Fibonacci here, the blue trend line, historical supports – all of that helping us identify, in this green-shaded area and under the blue trend line, resistance for the EURUSD. And of course, the red trend line representing the retracement that we’re seeing here of this previous downtrend.
Now, the Forex Black Book, of course, is red. It is darker red this week, because we do see that retracement taking place. Red represents a downtrend. The darker red means that the shorter-term trend is in disagreement, and we can see that along the red trend line that we see up here in the chart. Let’s go ahead and define this is a rising wedge. A rising wedge, or you might even term it as a bearish wedge. What you expect with this type of pattern, when you see a fall, a downtrend fall, and a retracement that consolidated within a wedge or constricts within a wedge-shaped pattern, is that you’re expecting two things. That it will find resistance, continue to find resistance at the topside of the wedge and eventually will breakdown underneath the red trend line, the bottom of the wedge, and begin the next leg of the trend.
So, that’s what I’m looking for. A bounce into resistance or a break of support within that rising or bearish wedge here, for the EURUSD. Let’s take that information down to the 4-Hour Chart. And we could see that rising wedge or bearish wedge there on the 4-Hour Chart. Also, there’s that red trend line representing the rising lows within this wedge pattern. We could see the resistance. I’m really just leaving the blue trend line from the previous uptrend. You could see connecting with the lows here prior to going into the lowest low and the current highs here, into the top of the green-shaded area. Even as high as the blue-shaded area, I expect could find resistance and turn back down.
The main focus here will be the breakdown of that green-shaded area. If we’re going to see a continuation of the downtrend, we want to see it break the bottom side of that red trend line, the green-shaded area, and the wedge. Then we look for it to continue to be bearish. All of that will change, of course, and the pattern will be invalidated, likely, if we break above the blue-shaded area. So, my expectation today is within the blue-shaded area or below it, we look for resistance. And below it could even cap at the blue trend line. So, below the blue trend line is resistance to go down, selling into resistance. If it breaks the blue-shaded area, all of that is invalidated and we’ll likely look for it to go higher. The other side of it, of course, would be a breakdown of the green zone and the red trend line. If it gets back underneath here, we’ll look for the continuation lower.
At no point today am I looking to buy this currency pair. I’m looking to sell the bearish wedge for the EURUSD today.
