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I’m going to get started today on the US Dollar versus the Canadian Dollar [USDCAD]. Starting on the Daily Chart, this currency pair has been in an uptrend for quite some time. We go all the way back into September of 2012 with the longest trend line that we could see here at the very bottom. We have a couple of shorter trend lines here representing a more midterm or last leg of the uptrend with the next, higher blue trend line, and then the last real leg of the trend with this red trend line.
We could see continuing to pressure higher and in an uptrend for the USDCAD. Over the past several days though, we’ve been bouncing around in a period of congestion between the highest highs, around the 1.0700-level and the lows here, just into the mid-1.0500s. So, the purple-shaded area holding as our support lows. The green-shaded area at the very top of the chart holding as our resistance highs over the past several days. And we can go back into November 29, here into the purple-shaded area, when it got above there. It’s been, since November 29, bouncing around between the highs and this purple-shaded area.
Follow that purple zone backwards in time; you can see historical resistance highs. I’ve put two vertical dashed lines here, where the last two resistance highs were in that purple zone, into the mid-1.0500s. And again, that is where we’re currently finding support. Those historical resistance holding as support along with that red trend line in this area of the mid to upper-1.0500s is our break point. If it breaks underneath there, likely looking for the continuation back down to the next support, which is this orange-shaded area, into the mid to upper-1.0400s and happens to be the next trend line – the blue trend line – that sits down here into the 1.0480-level.
Anything above the red trend line or above the purple-shaded area obviously has the potential to continue the direction of the trend, challenging the resistance highs. The green-shaded area of course is 1.0700. Above that, we’re likely pushing back towards the 1.0800-level.
Let’s go ahead and zoom in one time here on the Daily Chart just to get a closer perspective of that. We have a couple Fibonaccis that I want to mention. In fact, I’m going to take this longer one. I’ll leave the longer one. The longer one goes from the longest trend that we could see, and that’s coming from the left-hand side of the chart – the red dashed line. We could find some Fibonacci along that. The .236 of that trend range sits at 1.0475. That’s the bottom of our orange-shaded area.
Then we take Fibonacci from the current highest high to the lowest low that we see here on this viewpoint of the Daily Chart. We find that right now the market is finding support at the .236 fib at 1.0604. That’s where we’re currently holding as support and that’s the .236 fib of this trend range. Now, I have a little bit of a shorter range. Just the last little uptick from the high down to this low inside the purple-shaded area, and of course that puts the .786 fib and .886 fib right here into the top part of that purple-shaded area. So, some Fibonacci in there also helping us identify support right here into the purple-shaded area. The next fib beyond the purple-shaded area would be back down here, closer to the orange zone. And we could see that the market has just been bouncing around between the purple, yellow, and green-shaded area over the past several days.
Let’s go ahead and take this information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart and it refreshes, we could see that of course the yellow-shaded area is currently holding as our resistance. So, let’s go ahead and bring this arrow down here. Currently holding as resistance into the yellow-shaded area. We see a little bit of holiday gapping, a little bit of a weak price gap from the holiday. A little bit higher now, coming back down a little bit. The purple-shaded area of course is our next support. Beyond that, we’re going a little bit lower, down into the 1.0400s.
Just above the yellow-shaded area, where we’re currently finding resistance – if we were to break above this, which would be right around 1.0665, of course we’ll look for the push back into the green-shaded area. We did finally get some bank flow levels the day before the holiday break late in the day and we could see those bank flow levels sitting here all the way up into the green-shaded area and all the way down here below the purple-shaded area and not anywhere close to the current market. It’s going to take a pretty decent rally or fall before we’ll see the market challenge into what is our most recent bank flow levels.
If the levels come out today in a similar fashion, of course we’ll need to see a breakout before we’ll see those levels achieve. I expect that, at least at this point, the focus should be for the trend, which, as we looked at on the Daily Chart, has been an uptrend for quite some time. We have seen some bearish movement, but it is my expectation. Remember: higher highs and higher lows is an uptrend. And as long as we remain in that pattern – and I’ll just put a quick blue trend line right here. Higher lows. As long as we remain in that pattern and we don’t see a breakdown of this purple-shaded area and our most recent lows, that’s the direction I want to focus in – the uptrend. So, buys on dips into the purple zone, into the red trend line, into the Fibonacci, or into the last lows, we’ll look for opportunities to buy it down here in the direction of the trend. Challenge of the yellow or the green-shaded area and a breakout, look for the continuation of the uptrend. The only thing that changes that outlook would be a breakdown underneath the trend lines, underneath these last support lows. Underneath the purple-shaded area, we likely look for that push back down into the 1.0400s for the USDCAD.
