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I’m going to begin the day today on the US Dollar versus the Canadian Dollar [USDCAD]. Starting here on the Daily Chart, we’re first going to determine the trend, and what we’re looking for as technical traders using lines and indicators are clues to a potential outcome. So, you could see I’ve drawn a lot of different lines here on the chart.
So, our first evidence that we’re looking for is evidence of the trend, so we take a look at several different things. First off, the previous downtrend was moving down from the top left of the chart, down to the low, and that changed as it started moving higher and we started seeing a change of the price pattern, which went from lower highs and lower lows to higher highs and higher lows. And we’ve represented that with this green trend line as it started moving back higher again.
Another tool that we’re using here on this chart to identify the trend is a 100-day moving average or 100-period moving average on the Daily Chart. That’s the green, wavy line you see here in the middle of the chart. Previously, in the downtrend, it got under that moving average and continued the downtrend till it hit a low, came back up, and now we’re sitting above that 100-day moving average. So, we have two pieces of evidence now. The trend line and the moving average all pointing to upside here for the USDCAD.
Third tool that we’re going to look at is the Forex Black Book trend bar. It’s a momentum device looking at momentum in the market using trends and momentum, and you could see down there it’s green, which for us represents a bullish or buy bias here for this currency pair. So, three pieces of evidence there, really showing that there’s an uptrend bias here for this currency pair. Well, if that’s the case, if it’s truly an uptrend bias, then we’re going to look for opportunities with low risk and high potential reward to buy it. And the way I always look for those opportunities is just to say buying low or selling high.
So, in the case of an uptrend, you want to buy as low as possible. You want to buy on dips into support. And if you take a look at all the indicators that you have here, looking at historical support and resistance and current support and resistance, I’ve also thrown some Fibonacci in here. Several different ranges with Fibonacci to help us identify naturally recurring patterns of support and resistance. If you look at all of those indicators of support and resistance, right now we’re in this pink-shaded area at the top. I’ve also put this black trend line there to represent historical resistance and current resistance, and it really shows kind of a channel or range here developing between the pink and the blue zone. And we could see we’re at the very top of that channel or range and we’re into resistance.
So, it doesn’t become the most ideal area to buy it. Preferably, what we’d like to see here for the USDCAD is a dip lower. Bottom of the pink zone, maybe even deep as the orange or the blue-shaded area at the bottom of that, even closer towards the 100-day moving average to give us a better buying opportunity. A better price for our investment. Now, that being said, there’s potential for a little bit of retracement. We can see that over here on the left-hand side. And I’ve put these two circles here to give us an idea how the market is duplicating what it’s done in the past. And again, that’s what technical traders are looking for. Historical patterns, like you see on the left-hand circle, to repeat themselves on the right-hand circle.
And you could see resistance into the pink zone continually gave a little bit of a retracement down to the blue zone. Well, within the downtrend, eventually it broke underneath the blue-shaded area and continued down. What we’re hoping for over here on the right-hand side within the uptrend pattern that we’ve just looked at is that eventually we’ll see the breakout to the topside of our little range or congestion or resistance that we’re looking at now. So, it’s my expectation there’s several different things that we’re looking for. First off would be the dip back down to the support. That would be our first opportunity to buy it. That would be maybe the bottom of the pink-shaded area, but I think even better would be down here towards the black line, which would be down towards the orange or the blue-shaded area. That gives us a much better investment with lower risk. Your stops are smaller underneath the blue zone than if you were to buy it right now and your risk is much larger.
The other opportunity that we could look for here for the USDCAD would be a breakout above that resistance, above the pink-shaded area, which we haven’t done yet. I typically, in the Trade Room, talk about a breakout being an open and close. A single candle body opening and closing, specifically here on the Daily Chart above a resistance. And you could see we have not seen any singular candles open and close above that pink-shaded area and the 1.0975-level. So, until we do that, I’m not confident in a breakout. False breakouts could occur and we could see that retracement back down.
So, for the day today, to wrap all that up, we’re looking for two things. A dip back to support to buy in the direction of the trend or a breakout above resistance to buy in the direction of the trend. If you’re looking for reversal for this currency pair, I would likely wait for some further clues of reversal. Candlesticks that imply reversal. Shooting star, engulfing candle, whatnot. A change of the trending pattern, which would be lower highs and lower lows, and we don’t see any of that. There’s no indications or evidence of reversal right now.
We’re into resistance, yes, but no indications of reversal that we could see here on the Daily Chart. Let’s go ahead and take all of that information down to the 4-Hour Chart. And as we get down here, we’re going to add in one more tool on the 4-Hour Chart, which is the bank flow levels, and we looked at these yesterday in the Trade Room. The bank flow levels pretty much implying everything that we talked about there on the Daily. Actually let me zoom out a little bit, so we could see this a little bit better.
There’s our two black lines. There’s our green line. We don’t see the 100-day moving average on this chart, but you could know that it was down there around the orange-shaded area. And guess where our bank flow buy levels were yesterday. You could see them down here into the orange-shaded area. So, once again, that’s confirming of course that there will be a potential influx of buy orders as it dips down into support, as it dips down into the orange-shaded area, closer to the green line.
Those bank flow levels from yesterday were 1.0925, 1.0917, and 1.0891. Those are bank flow buy levels. So, again, a dip back down to support gives you a better lower-risk opportunity to buy it, and then you look for it to go back up. Sell levels capping the market. Yesterday the sellers capping the market just underneath the green-shaded area. We have seen an open and close here on the 4-Hour Chart, above the pink-shaded area, but I’m still looking for that on the Daily Chart to give me some upside expectation.
Again, there is a possibility that we could see support at the bottom of the pink zone, but I think much better lower risk, higher reward opportunity comes the closer it gets down there towards the orange-shaded area. Forex Black Book trend bar is green. You’re looking for a new green arrow. I really don’t think you’re going to see a new green arrow unless it takes that dip all the way back down to the orange zone today for the USDCAD.
