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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, not too hard to see that this currency pair currently is in a downtrend. We started all the way at the top of the chart, closer to the 1.4000-level. Back at the beginning of May, we made our first leg of the downtrend, pushing down here into the pink-shaded area towards 1.3500. A little bit of a retracement, and then the second leg pushing all the way back down here into the mid to upper-1.3300s, the green-shaded area at the bottom of the chart.
We’ve also represented that downtrend with a red trend line. We could see where the market is still well underneath that red trend line. That trend line connects after the market made this little bit of a retracement in the middle of the trend. We’re clearly underneath the 100-day moving average also, so that’s not even a factor as far as looking for a new resistance level based on that moving average.
I’ve also taken Fibonacci retracement measurement from the low here in the middle of the chart, where the black X is and the pink-shaded area to the previous resistance high. And the reason that’s important is looking at Fibonacci extension levels. The Fibonacci extension level of that previous leg of the uptrend, the 1.27 Fibonacci extension level, is right at the bottom of the green-shaded area. I know it’s hard to see the numbers here because there’s an overlap with a previous uptrend leg of the fib, but that’s important too because we now see not only the 1.27 of this last leg of the downtrend, but we also see a fib of the previous uptrend sitting right here at the bottom of the green-shaded area, showing us that that’s a clear support level.
And we can see that over the past week or so. The four days this week, including today, we see a couple of days last week finding support in this green zone. So, it’s my expectation that as long as we sit right here at this green-shaded area, and we haven’t seen a clear breakout, that we could see some reversal for this currency pair, at least a little bit of a pullback or correction like what we saw in the middle of the chart. That’s not a guarantee, but definitely something to consider as we have not broken out underneath the 1.3375-level.
Now, let me define a breakout for you here before we continue on. For me, I’m going to look for a clear single-candle body open and close outside of that support, so underneath that support, and we haven’t seen that yet. We go back a few days ago where we saw this longer red candle close right at the bottom of the green zone. Then the next day opened and then closed back inside the green zone. That’s the little blue candle. Then it opened on the next day. Closed below it. Opened today. Now we’re above it. So, we haven’t seen a singular candle body underneath that green zone, which tells me so far it’s been a failed or false breakout and has potential to rally into resistance.
I still want to focus my efforts in the direction of the trend. I’m still looking for opportunities to sell it, until there’s a change of the pattern of the trend. Of course the pattern of the trend is lower highs and lower lows. That’s a downtrend. And so, until we see a change in the pattern of the trend or some other clues, candlestick formations or patterns that show us a reversal, I’m going to continue to concentrate my efforts in the direction of the trend, even on rallies back into resistance. That could be the orange-shaded area, where we saw resistance a few days ago. It could even be as high as the trend line and the pink-shaded area.
If I go ahead and put a couple of black arrows, let’s just show this. This is resistance and that becomes a potential selling opportunity. This is resistance. That becomes a potential selling opportunity. And clearly if we finally do see that open and close under the green zone, that would become resistance also. So, definitely some things to watch out for there.
What about buying this currency pair? I suppose if you’re going to buy it, pretty much the very best opportunity right now to buy it with your stop underneath the last lowest low that you see here. The lowest low of this candle right here is 1.3333. That’s down here at the bottom of that candle. So, if you were going to take a buy, I would guess that your stop placement or your risk is underneath that 1.3333-level, which is pretty far away, seeing that the current market price is approaching the 1.3390-level, so you’re at least a 60-pip stop, if not a little bit more if you were to take a buy right now.
So, you want it as close as possible to the bottom of that green zone if you’re going to consider a buy scenario. Otherwise, you’re watching for resistance and selling in the direction of our current trend. Forex Black Book trend bar is red also, so that gives you some opportunities to look for selling for the EURUSD.
Let’s go ahead and take all of that information down to the 4-Hour Chart. Get a little bit of a tighter view of this pair. We’ll bring these arrows over because I think this is important too, that yesterday’s bank flow levels. They came out pretty late in the day, but they are showing resistance right there into that orange-shaded area. You see yesterday’s bank flow levels at 1.3429, 1.3441, as high as 1.3466. So, if you’re going to sell it in the direction of the current trend, those become potential resistance points for us for the EURUSD.
Let’s take one more Fibonacci on this chart. I’m going to take a Fibonacci retracement from the highest high that we see here on the chart all the way up here at the top of the chart, above the blue-shaded area, down to the current low. So, going from the high, down to the low puts the .236 fib, by the way, right at the bottom of that orange-shaded area. 1.3418 is the .236 fib, and of course the .382 of that same trend range sits all the way up here towards the pink-shaded area and the red trend line. 1.3472.
So, quite a bit higher for that. .236 at the bottom of the orange zone. That’s our last hope for resistance and then we look for it to go back down in the direction of the trend. We have seen several attempts on the 4-Hour Chart to open and close underneath here and still has stalled and pushed back higher again. So, I suspect if you’re looking for that breakout open and close under the green zone, it needs to be on the Daily Chart to give you some confidence it’s going to go down.
So, for me, today, I’m going to continue to focus my efforts in the direction of the trend, but I think there’s probably going to be some retracement or correction here for this currency pair. Back to the orange zone for resistance or back to the pink zone for resistance and the trend line. I’ll continue to watch for those.
One more thing here on the 4-Hour Chart. Let’s take a trend line right about right here, just representing this last leg of the downtrend. We could see we’re attempting to push above that right now. So, if that sustains a hold above that blue trend line, that could be our first clue that we’re looking for some further retracement. Maybe not a full reversal, but maybe some retracement of the last leg of the downtrend, some correction, and we look for resistance at higher levels, the orange or maybe even the pink-shaded area here for the EURUSD.
Still look for sells. Forex Black Book is red. I don’t see any reason to believe we’re going to get a red sell arrow. Likely I think it would need to go back up to the pink-shaded area, red trend line before we could even get a new sell red arrow for this currency pair with the Forex Black Book today.