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I’m going to begin the day today on the US Dollar versus the Canadian Dollar [USDCAD]. Starting on the Daily Chart, we could see that over the long haul this currency pair has been in an uptrend, following the blue trend line back to the left-hand side of the chart. And actually, it goes all the way back into December of 2012, where we began the uptrend and it’s been climbing higher ever since.
Now, over the past several weeks, we have seen a bit of a change in that trending pattern. Within the uptrend, of course, we see higher high and higher lows. Over the past several weeks, we go all the way back here into July of this year; we see a couple of lower highs created, as the market has fallen along this red trend line, but we’re still within the parameters of an overall uptrend. The blue trend line representing that long-term trend. The only real reason we would expect that we’re looking for a change of the entire trend pattern is if we start to see some new lower lows for this currency pair.
Now, even in the shorter timeframe, we go all the way back here into September; we can see that this currency pair began a short leg of the uptrend, climbing from here into the 101s, as it pushed all the way back up here into the 105-level, and a little bit of a retracement of that uptrend coming right now, as it’s pushing down from the highs. Also, here, on the Daily Chart, we could see that since October 25, where the vertical black dashed line here, we can see that the market has been holding as support within this blue-shaded area and resistance within this orange-shaded area. So, we’ve gone into a bit of consolidation, or congestion, where the market has held as support and resistance between these two shaded areas up here at the top of the chart, since October 25.
Now, most recently, of course, we’ve come off the tops into the 1.0500-level, 1.0475-level. That’s the orange-shaded area. We challenged into the red trend line and now falling off those highs. Now we’re testing into the supports. The blue-shaded area goes between 1.0400 and 1.0250. That’s the blue-shaded area that the market is currently challenging. Follow that blue-shaded area back in time; we could see the historical supports right here, as the market, six days, found support into this blue-shaded area and began its rally back into the orange-shaded area. Follow it even further back in time; we could see back here, into October 10, resistance into that blue-shaded area. Following it even further back in time, here into August and here into July, we could see some resistance into that blue-shaded area. And then, once again, following it all the way back here into May of this year, we could see resistance into this blue zone.
So, this blue-shaded area has been a critical historical resistance and support level many times for the USDCAD, going all the way back into May. So, we could see resistance, resistance, and currently, now, finding support on top of here. As long as we hold within or above this blue-shaded area, there’s potential for us to do what we’ve been doing since October 25 and bounce around inside this area of congestion, or breakdown of 1.0400, the bottom of the blue-shaded area, likely pushing down to the next area of support, which is this purple-shaded area, closer to the 1.0370s and 1.0360s, and closer towards the blue trend line.
Now, of course, with the Forex Black Book, we have a green trend bar. It’s dark green now, but it is green, giving us an overall buy or uptrend bias. It is dark green, showing the shorter-term trend are now in disagreement with the longer-term trend. The ideal scenario is that it finds support or bounces on support, starts going back up, the trend bar turns bright green, and we look for the breakout above the orange-shaded area and the continuation higher. So far, I don’t see any real reason to believe that we have changed a trend pattern into a downtrend. We even haven’t broken the last lows here into the blue-shaded area. So, as long as we hold within or above the blue zone, I believe buying on dips become lowest risk opportunities. Selling right now is a pretty high risk because there is a great expectation of support here into the blue-shaded area.
Let’s go ahead and take that information down to the 4-Hour Chart. And again, there’s that blue-shaded area here between the 1.0400 and the 1.0425-level. We also go back into last Thursday and Friday. Actually, going back into Wednesday, Thursday, and Friday, we could see the bank flow levels from last week – the end of last week – sitting here into the blue-shaded area. So, blue-shaded area has last week’s bank flow levels and historical resistance and support. So, likely finding some support here today and looking for a bounce higher. The only real reason to believe it will continue to pressure lower today would likely be a break underneath 1.0400. Open and close under there, likely pushing all the way back down towards the 1.0360s and the purple-shaded area.
So, let’s go ahead and outline this. Within or above the blue-shaded area, this arrow here represents our buying opportunities to challenge back towards the orange zone as our next profit target on the upside, back into the orange-shaded area and these last resistance. If we get an open and close underneath 1.0400 today, likely looking for at least a push back down into the 1.0360s, the purple zone, and the blue trend line here for the USDCAD. If, over the next couple of days, the trend bar with the Forex Black Book turns bright green again, we’ll likely look for new buying opportunities.
So, right now we’re challenging into support. As long as it stays above it, I’m looking for buying opportunities. If it breaks these last two supports, then we look for it to continue to pressure lower. Selling right now not really an opportunity until it breaks these last supports at 1.0400. For right now, your lowest risk, highest potential reward opportunity would be for buys looking to target back to the orange zone or higher. And I say lowest risk because your stops go likely just underneath the 1.0390-level and these last lows, because if it breaks underneath here, you don’t really want to stay in a buy any longer. So, if you look for a buy here into the blue-shaded area – 1.0400 – stops pretty light down into the 1.0380s, looking for it to turn from here and start working its way back higher for the USDCAD today.
