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I’m going to begging the day today on the US Dollar versus the Canadian Dollar [USDCAD]. Before I begin today’s analysis, in a little less than one hour from the recording of this video, there is some data out of Canada, employment numbers, coming up at 8:30 Eastern Time today, so you definitely want to take that as a side note as you look at the analysis for today on this currency pair.
So, getting started here on the Weekly Chart, obviously this currency pair has been in an uptrend for quite some time. We go all the way back down into July, August and September of 2012. Bottom left-hand side of the chart. We made a low down here, close to the 0.9600-level, and then began a turnaround, which went for a couple of years, pushing all the way back up here into the 1.1200s. Then we saw a pretty healthy retracement back down here into the 1.0600s, and now returning the uptrend as push right back up into the previous high at the beginning of this year, 2014.
Over the past several days and couple of weeks really, I’ve been talking about this purple-shaded area up here into the low-1.1200s as a historical resistance, but also a barrier that we would look for. A key resistance point that if we broke above it, we would likely look for this currency pair to continue the uptrend and move higher. But it also become, as we can see historically, a potential reversal point as we look for clues and evidence of that reversal.
Evidence of reversal is really you have to define the trend first. A trend is higher highs and higher lows. That’s how we can visually identify a trend. The lows are getting higher. The highs are getting higher. The pattern of the trend changes when that trend changes or that pattern of the trend changes. We start to see lower highs and lower lows, and we don’t really see that yet here on the Weekly Chart. No real evidence yet of a trend change. Now, as we look at this week’s candle, the current weekly candle, which is kind of hard to see here, but you see we have a red body. A little red body with a longer shadow or wick on the bottom. That could be interpreted as a hanging man candlestick if you’re familiar with candlestick formations, but we have to know that we have to wait of the end of day today.
We don’t know what today’s candle is going to end up like. If the news come out in a particular way and drives this higher, it could end up a long bullish candle. If it comes out in a particular way and this goes lower, we could end up with a long bearish candle. So, we don’t really know what today’s candle will look like, but as it stands right now, it could be a clue to potential reversal if we end up as a hanging man candle. So, we’ll keep an eye on that by the end of day today because that ends the full week here for the USDCAD. So, definitely some interesting areas, but the most interesting thing about this would be that purple-shaded area as our current historical resistance here for the USDCAD.
Take that information down to the Daily Chart. We can see this a little bit more. Zoom out one time. You could see that historical resistance on the left, inside that purple-shaded area. We can now see it on the right, inside that purple-shaded area. This is a key decision point. In fact, I’ll just draw it over a little bit and put a couple of arrows here. As long as we stay within it or below it, we could be looking for reversal for this to turn around and go back down. Remember the pattern of the trend is higher highs and higher lows, and for us to see a difference in that it has to turn into lower highs and lower lows.
A continuation of the trend of course would be a breakout of this area. We’ll call it 1.1250. If it gets above 1.1250, we’re probably looking for it back into the 1.1300s as we look for a continuation of the uptrend. So, that key decision point there into the purple-shaded area. Blue zone right now acting as a little support. Yellow zone even more support all the way down there. We can see that over the past few weeks, where we have seen support down here into the yellow-shaded area and a clear push underneath there, we would look for the green zone and the black trend line to be challenged one more time.
The blue zone. Maybe some intraday support there, but I definitely think that the news in about 45 minutes from now will likely affect this blue zone. We’re either going to stay above it, push through the purple zone and go higher, or we break the blue zone and we’re back to the yellow or maybe even the green-shaded area here for the USDCAD.
Forex Black Book trend bar is green. It is dark green, so if you’re looking for a scenario there, you’d likely be looking for a green arrow on the 4-Hour Chart, but I would definitely prefer to buy this if it gets further away from that resistance high, the purple-shaded area, because that’s definitely a resistance barrier and a brick wall in the market really right now for the USDCAD.
Let’s take all that information down the 4-Hour Chart, and we could see the price action over the past several days has been pretty wild and sporadic here. We saw the challenge of the purple zone. Dip to the yellow zone. Back into the purple zone. Back to the yellow zone. Now we are right back up into the purple-shaded area. So, it’s clear to us that the purple zone is resistance. A final breakout of that 1.1250 goes higher. We’ve seen support down here into the yellow-shaded area. That’s clear. We’ve seen quite a bit of congestion, so let’s actually put one arrow here. We know that this is a congestion zone and below it we look for it to go down to the yellow or the green-shaded area as our next two support zones here for the USDCAD.
Breaking above the purple zone, again, I think we’re back into the 1.1300s without too much hesitation. Just think logically and common sense here for the USDCAD. If you were in a sell, where would you put a stop? Well, likely just above the purple-shaded area. So, if the market pushes higher, those stops are triggered, then we’re likely to look for the market to continue to surge higher. That’s assuming that there are these stop loss orders just above the purple-shaded area. When those stop loss orders get hit, we see a surge in the market. If the market pressures away from it, then we see those stop loss orders start to get lower and lower and lower. So, that’s just a little bit of common sense in the market and why we would see that surge into the 1.1300s if it broke through the 1.1255-level.
So, for the day today, we’ve got to watch that news in 45 minutes from now. We have to watch it to see what that’s going to do to this pair. If it stays under the purple zone, we start to see a fall on the USDCAD, we’re back under the blue zone, we go to the yellow zone or the green zone. So, if you’re going to trade this, if you’re selling, if you sell it on the news, if whatever happens and it comes out for selling, if you sell the purple zone, you look for a break of the blue zone. You target the yellow zone. If it breaks there, of course breaks under the yellow zone, you target the green zone. Those are your targets on the way down if it goes in that direction.
If it comes out for a buy, then you buy it either into the blue zone or a break above the purple zone and you look to target back into the 1.1300s for the USDCAD today. Forex Black Book, again, is green. We did get a green arrow right here, but I don’t think it was sufficient enough to see an opportunity to buy this. Again, the closer we are to that purple-shaded area just discourages me from buying it because we have found resistance there since the beginning of the year. So, not really a signal for me. If that green arrow would’ve shown up when it was touching the yellow-shaded area, that would have been a different story, but it was a little bit too high for me when it did actually show a green arrow. So, it has to go much further down before I would buy it, or a breakout above the resistance today, we look for a continuation of the longer-term trend, back to the 1.1300s for the USDCAD.
