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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. I’m going to stat all the way out here on the Weekly Chart today because I think we need to get a longer-term view of this currency pair first. Going all the way back to the left-hand side of the chart, we can see the previous downtrend. I’ve measured between these two black X’s. The highest high up here into the 1.4938-level. The lowest low being down here into the 1.2040-level. Between those two black X’s, I’ve measured with Fibonacci using the Fibonacci tool.
In doing so, I find the .618 Fibonacci retracement level right at 1.3831. And I’ve placed a red horizontal line on there so we can easily pick that out of all the lines here on the chart. The only red horizontal line that we see here is right at that .618 Fibonacci retracement level at 1.3831 for the EURUSD.
Now let’s take that information down to the Daily Chart and we can now see how that’s important to us in the current market, because over the past two days, we have found resistance underneath the .618 Fibonacci retracement level. Now, I’ve also highlighted that zone of resistance just underneath that level in green, so we can easily pick out the fact that this currency pair, over the past four days, has found resistance between the 1.3787-level – the 1.3780s – at the bottom of that green zone and the top of that green-shaded area towards that Fibonacci level at 1.3827.
And as long as it holds within or underneath that green zone, there’s potential to watch for clues or indicators of reversal and possibly a change in direction for this currency pair. Obviously for the past several months, we have been in an up trend. Higher highs, higher lows has continued even in the most recent days to make new highs within that uptrend.
Now, uptrends are great, and we want to trade in the direction of the trend. And in that case, our best opportunities to trade in the direction of the trend would be on retracements. Dips into support. Once it finds support, we find a lower risk, higher potential reward opportunity to buy it to challenge in the direction of the trend. So, remember your motto: buy low, sell high. Well, right now we’re at the highest peak of this trend. Not your best opportunity. Not your lowest-risk opportunity to buy it. So, it’s my expectation that if I wanted to buy it in the direction of the trend, I’d actually like to see it come back down here towards the 1.3700-level.
This pink-shaded area. The red trend line that sits just underneath the current market, where this black arrow is. And you follow it back and you see some historical resistance there. So, that would actually be the best scenario, in this case, if you’re looking to buy it in the direction of the trend on a dip back down to the pink zone. And I can give you a great example of that; is the last time we saw a rise out of the trend. It went into a period of consolidation, found support into this green-shaded area here into the mid- to upper-1.3400s, dipping into support, and then the new rise.
So, there’s a great example of what we would look for. A dip into support. A rise. A dip into support. A rise. So that gives us our best opportunity. So, that being the case, if we’re looking for buy-low opportunities within the uptrend, we want to buy into support. We could also look for selling into resistance and looking for those clues to reversal; and potentially, if it does continue to push down, we could even look for a longer-term change in direction for this currency pair.
Now let’s take all that information down to the 4-Hour Chart. And of course, over the past several days, there we are, holding inside that green-shaded area. We can even see, over the past two days, the bank flow levels sitting just inside that green-shaded area and the market holding underneath the .618 Fibonacci level at 1.3830. So, as long as we hold within or under that green zone, I expect there’s potential for reversal. At this point, we’re finding some support at the 1.3787-level. That’s the bottom of the green zone.
Let’s go ahead and zoom it in now, here on the 4-Hour Chart. There’s the bottom of that green zone. There’s the 1.3787-level. That’s where the market is currently finding support. So, over the past several hours, we’ve been bouncing around inside that green zone. So, it’s the best expectation that if you’re looking to sell this currency pair, you would look for the break underneath support, which would be your first clue to a change in direction.
The pattern that we’re seeing here – the rise, the bull candle, the previous three candles ago, the long bull candle, the smaller blue candle here in the middle, and now the longer red candle – begins to give me a clue that we could be looking for a breakout underneath that green-shaded area at the potential change in direction. Could be short-term or long-term, but a potential change in direction to target all the way back down to this pink-shaded area where our last resistance high sits down here.
So, an open and close break underneath 1.3787 – and that’s a key important thing to that; is that you want to see an open and close underneath there. A clear single-candle body underneath there gives you higher confidence. It’s kind of a safety trigger that you’re looking for it to continue to fall back down towards 1.3700 and the pink-shaded area. Now, of course, what the risk is in that scenario is that it breaks above the green zone and continues the uptrend. So, if you’re going to sell it today into the bank flow levels or a break under the green zone, your stop is just above that Fibonacci level at 1.3831. Evaluate that risk and see if that matches with your own risk assessment. If it does, then that’s what I’ll be looking for today.
The only other opportunity I think that exists today is that break above that 1.3837-level. If it opens and closes above the green zone, then we look for it to continue to pressure higher for the EURUSD today.
