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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 can easily see that the previous trend was up. We start from the bottom left-hand side of the chart, down into the mid-1.2700s. We saw the climb as the market continued to pressure higher all the way up here into the low-1.3800s and the green-shaded area at the very top of the chart. Then, over the past several weeks, we’ve seen a change in that pattern, a fall back down from the 1.3800s, back down here, settling out into the 1.3400s for several days. Finally breaking below the blue trend line from the lowest low. Breaking below that trend line, pushing all the way back down to 1.3300.
Now, over the past couple of weeks, we’ve seen a retracement of that previous downward move. We had this previous downtrend, a retracement, as the market has pushed back higher again, underneath that same blue trend line. In the Trade Room, we’ve been discussing the fact that there are two planes of support and resistance. We have the horizontal plane of support and resistance, which most people are of course familiar with, but we also have a diagonal plane of support and resistance. During the uptrend, the market found support along the trend line, which was a diagonal plane of support on the way up. Then, once it broke underneath that support here, we saw that same diagonal plane of support becoming resistance.
So, currently, that same blue trend line and the historical supports along that trend line are now acting as resistance. Well, just like a horizontal plane of support and resistance, we would expect that as long as it holds underneath the resistance, we could see it fall back down. If it breaks above that resistance, we look for it to go back higher again. So, if we think about this blue trend line as resistance, right now, as long as it stays underneath it, as we’ve seen it over the past couple of weeks, there’s potential for it to begin falling back down. If we see a clear break above that blue trend line, then we’re likely looking for it to continue to pressure higher and a new challenge of the highest highs all the way at the top of the chart into the 1.3800s.
So, it’s my expectation today we’re looking for resistance. We’re looking for horizontal resistance as well as diagonal resistance. We’re looking for an opportunity for this to find resistance, turn around, and start going back down in the direction of this previous downtrend. We can also see that the Forex Black Book trend bar, over the past couple of weeks, has been red, giving us a bearish or selling bias for this currency pair. Taking Fibonacci from the last high all the way up here at the top of the chart down to the current low, we found the 50% retracement level sitting here in the blue zone.
Well, today, we’ve now seen it push above that 50% retracement. The next Fibonacci retracement that we would come in contact with would be the .618 fib, and that sits right here into 1.3627. So, if you’re looking for the next resistance above the blue-shaded area and the blue trend line, it would likely be this yellow-shaded area at 1.3627 and the .618 fib. Follow that backwards in time; you could see that this market has already found resistance back here on the left-hand side back into October 4, October 3. October 4 – we saw resistance into that yellow-shaded area. We could, again, expect to see that here into the low-1.3600s, as the market challenges. Another 20 to 25 pips higher, we’d see the market challenging into that yellow-shaded area and that .618 fib, giving us a high degree of expectancy of resistance and the possibility of turning back down.
Any sells that you take into resistance target back down to the bottom of this channel that we see here. This flag pattern channel. The bottom of the red trend line. The red trend line representing this upward trend that we’ve seen over the past few weeks. We would expect to target back to the green-shaded area and the red trend line on any sells. And of course, a break through there continues the bearish trend for the EURUSD. That all changes, of course, if we see the break above the .618. Above this blue trend line, I think we’re likely looking for it to turn back higher towards the highest highs on the chart for the EURUSD.
Taking all that information down to the next smaller compression, down to the 4-Hour Chart, we have now seen the market pressuring to the blue-shaded area. Yesterday and the day before that, the bank flow levels sitting here into the blue-shaded area. We could see, over the past several days, the bank flow levels sitting into this blue-shaded area. We’ve now seen, today, the market pushing through yesterday’s levels and pushing a little bit higher. I don’t think we’ll see a dramatic change in the bank flow levels today. It’s likely that when those levels are published later on today, we’ll likely see them sitting right here into the bottom of the yellow-shaded area, right around the .618 fib that we discussed from the Daily Chart.
If I zoom out one more time, here on the 4-Hour Chart, you could see that previous downtrend, highest high, the lowest low on the 4-Hour Chart. .618 fib sitting here at 1.3627 of that previous downtrend. Bottom of the yellow-shaded area. Historical resistance. Bottom of the yellow-shaded area. In fact, I probably should move this black line up a little bit, closer towards those resistance highs that you see on the left-hand side, closer to that .618. So, right there into the 1.3620s. Right now, the current market is at 1.3593; at the recording of this video. Again, I would expect that as it challenges higher that becomes our resistance for the today. I expect to see the bank flow levels there, right into the current highs or into the yellow-shaded area today. And I’m looking for opportunities for this to go back down. Start creating lower highs and lower lows, targeting back down to the red trend line and the green-shaded area or lower.
So, I’m looking for resistance and selling opportunities. The only thing that will change that for me would be, of course, a break above this yellow-shaded area and the .618 fib. Then we’re likely looking for a target back into the green-shaded area at the very top of the chart into the 1.3800s for the EURUSD.
