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I’m going to begin the day today on the US Dollar versus the Canadian Dollar [USDCAD]. Today I’m going to start all the way out on the Weekly Chart so we can get a long-term view for this currency pair. We’re going to follow the red trend line all the way back down to the bottom left-hand side. We could see, going back to September of 2012 is were this trend began. Over the life of the trend, we saw higher highs and higher lows, as it continued to push from the bottom of the trend line, down here close to the 0.9600-level, all the way up to top of the chart into the 1.1200s.
Now, over the past couple of months, we’ve seen a pullback, a retracement for this currency pair, as it has fallen from the 1.1200s, all the way back now into the 1.0600s. What’s interesting today is that as we continue to fall back down, we see the market now approaching this previous up trend line, the red trend line coming here into the 1.0600-level. So, I think it’s important for us to realize where that trend line comes from before we go down to the Daily Chart.
Now we get down here to the Daily Chart and we could see how close the market is now to that red trend line. Interesting here, where that red trend line sits, is if you follow it back to the left-hand side, you could see an area of congestion here. I have this red box to help us identify it. Under the pink zone is resistance and into the yellow zone as support, so we see historical support into this yellow-shaded area, which matches with that weekly trend line that we began looking at.
Not only that is if we take Fibonacci retracement measurements from the low of the trend that we see down here at the bottom left-hand side of the chart. Basically where the trend line connects to the market here, we could see from the low at 1.0187. Taking Fibonacci from there, all the way up to the current resistance high actually puts the .618 Fibonacci retracement level at 1.0600. That’s exactly at the top of our yellow-shaded area.
So, several things lining up here to be support today. We have the .618 fib, as we just described here, at 1.0600. We have the red trend line coming from the Weekly Chart. And we also see that historical support on the left-hand side, where this period of congestion is inside this red box. So, for the day today, I think it’s pretty clear what we can expect. Of course if you’re in a sell, you’re looking to target this yellow-shaded area as your profit target. So, if you’re selling, this becomes a pretty clear profit target.
Now, if it breaks underneath there, of course we’d look for it to go lower, but I think today it’s likely going to have a very difficult time breaking underneath that yellow-shaded area. So, it’s likely to find support here today. So, if you’re selling, you’re using this as a profit target. If you’re not selling, I don’t think selling right now is probably your best opportunity with the low risk, high reward, but I do think that as it approaches 1.0600, we could begin looking for support and clues to reversal, which could see a bounce back, which would take it back to the last resistance.
As we look for a new resistance, of course as we described yesterday in the Trade Room, the pink-shaded area will be your resistance. If you were looking to sell, you were selling into or underneath the pink-shaded area. If you’re looking to buy, clearly today the yellow-shaded area becomes your opportunity. And if you look back again to the left-hand side of the chart, where the red box is, there was a several-week period where it just bounced around inside here between the pink and yellow zone. We started on November 29th and it went all the way through January 7th. So, about two months we saw it bouncing around between the yellow and the pink zone.
It’s not telling us that that’s exactly what’s going to happen this time, but does give us a pretty good idea of where our current support and resistance are held here for the USDCAD. And of course, at some point in time, if it breaks out under the yellow zone, we’ll look for it to continue to go lower or, at some point in time, if it breaks back above the pink zone, we’ll look for it to continue the previous uptrend that we’ve seen since 2012, which we began with on the Weekly Chart.
Let’s go ahead and take this information down to the 4-Hour Chart. And as we get down here to the 4-Hour, we can begin to see this in a little bit more detail. We could see it hasn’t been a dramatic drop since breaking through that pink-shaded area, but just a slow fall as it continues to pressure lower and the bears continue to stay in control. I think it’s very likely and highly likely that as the bears approach this yellow-shaded area, the 1.0600-level, that we’re likely looking for that support that we just began discussing.
1.0600. .618 fib sits right above or right at the top of the yellow zone. The red trend line. Clearly as close as possible to 1.0600 that you can get would become your very best lowest risk, highest potential reward buying opportunity. And again, if you’re already in a sell, if you sold under the pink zone, that is a clear profit target on the way down. Would I suggest selling it today? Well, I would suspect, if you’re looking for a sell today, you’re probably using more of a scalping type strategy. If I zoom it in a great deal here on the 4-Hour Chart, if you’re using a scalping type strategy, it’s likely that you would be looking for a breakout of this area right here.
And I’m just going to put a little shaded area here between 1.0630 and 1.0638. There’s about an eight pip area right there. Let me just highlight that real quick. There’s about an eight pip area right here, and I’m going to make – let’s make it something really bright so we can see it. Let’s make it the green color. So, that little green-shaded area there, it’s only eight pips top to bottom. You can see this is the past 12 hours or so. Actually 16 hours or so that the market has been bouncing around in an eight pip area. We need a breakout.
So, if you’re using a short-term or scalping strategy, you could look for a breakout underneath 1.0630 to target 1.0600 and the yellow-shaded area at the bottom of the chart. Clearly a break above 1.0640 and the top of that green-shaded area, you could be looking for it to go back up. So, for the day today, you’re looking for a breakout of this little eight-pip area, the green-shaded area for a continuation. If you’re already selling, just look for the break underneath 1.0630 to target the yellow zone. If you’re looking to sell it, that becomes an intraday opportunity to do that, but clearly as close as you get to the 1.0600-level and the yellow-shaded area at the bottom of the chart becomes an opportunity to look for a new buy for the USDCAD today.
Zoom it back out to our normal view. Squeezing it back in, you can clearly see where our major support and major resistance into the pink-shaded area will be today for the USDCAD.
