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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 Weekly Chart, I want to go back in time and look at some history here, first off, for this currency pair.
If we go back to the left-hand side of the chart, on the Weekly Chart, we’re going all the way back into 2009. Top left-hand side of the chart, all the way up into the 1.3000s. The highest high on the left-hand side of the chart. Taking Fibonacci measurements from that high down to the lowest low on the chart, down here in 2011. July of 2011. We’re looking all the way down here towards the 0.9400-level. So, Fibonacci of that previous downtrend.
And it’s important for the current market, because if you look at that downtrend, the Fibonacci levels, the 50% retracement level goes right here, where the red line is. The red horizontal line in the middle of the chart. That’s the 50% retracement level of this previous downtrend. The halfway point of the previous downtrend happens to sit at 1.1234 as it’s outlined on this chart feed here. From the highest high to the lowest low, 50% is 1.1234. That’s the red line right here in the middle of the chart.
If we follow it backwards in time even further, let’s go ahead and scroll back in time and you could see back here. We’re looking all the way back in 2006, where the market found some congestion, a little bit of ranging back here in 2006. A little bit above that red line, a little bit below it, but it found a little bit of congestion back here. So, we can also see history has recognized this level as support and resistance back in time.
So let’s go back into current time. Of course we could go all the way back to the right-hand side of the chart. We could see that the current market has been in an uptrend and we are stretching towards that 50% level. The next resistance level beyond that is quite a bit higher, all the way up here into the 1.1360s, because, again, you scroll back in time; the last time we were above that red line. If you take a look back in that same 2006 timeframe, 2005/2006, you could see some support and resistance along that black line, into the 1.1360-level. So, that would be the next resistance higher.
But right now we’re stretching to that 50% retracement level at 1.1234 right there at that red line. Let’s go ahead and now take that information down to the Daily Chart and you could see the current market stretching towards that 50% retracement level. It’s had a pretty difficult time over the past five or six days. We sat inside this blue-shaded area between 1.1100 and 1.1150 for quite some time. Over the past three days we’ve been trying to breach through there, but we have not seen an open and close.
Let’s go ahead and zoom in on the Daily Chart. We have not seen the market open and close, clearly open and close, above the 1.1150s. That’s what’s going to give me confidence it’s going to continue to pressure higher towards that red line and that 50% retracement level; would be a clear open and close. Otherwise, we’re just simply attempting to break above these resistance highs and no satisfied break.
Of course the uptrend is higher highs and higher lows. That pattern has not changed, so that would definitely be the direction of our overall focus. We want to trade in the direction of the trend. Dips into support become opportunities to trade and buy it in the direction of the trend. But the closer we get to that red line and that 50% retracement level from the Weekly Chart, we’ll also be looking for clues to reversal. Clues to potential change of the trend direction, which would change from higher highs and higher lows to lower highs and lower lows, but we have not seen that yet.
Let’s go ahead and take that information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, there’s that blue-shaded area that we looked at on the Daily Chart. It’s been holding underneath it for resistance for quite some time. We go all the way back here into January 23rd. We saw resistance here. Then it made a little bit of a dip down. Then it came back up. We saw January 28th going all through January 29th. Resistance into that top of that blue-shaded area into the 1.1150s.
Now, over the past couple of days, we saw a little bit of a change where it broke above it on the 4-Hour Chart. Opened and closed above it, came back down, dipped back down, and this is something we looked at into the Trade Room yesterday. The dip back down into the 1.1150s. If you were looking for a buying opportunity yesterday, that was just about your very best opportunity to buy it right around 1.1155, 1.1160. And now we could see it is now pushing back to 1.1190s right now.
A break above 1.1200, which is just about seven pips higher than the current market. A break above 1.1200, we already have an idea of where we might expect this to push to. Remember that red line sitting all the way at the top of the chart. Take a look at the bank flow levels over the past several days. We go all the way back over here into the 28th. Since the 28th, we see the bank flow levels and yesterday the bank flow levels sitting right here right into the 1.1150s, all the way up into the blue line, which is up there close to that 1.1230-level.
You could see that all the way up here. So, again, bank flow levels identifying that red line and just ahead of that red line as resistance. So, if you’re in a buy, if you took a buy into the blue-shaded area, which would’ve been your best opportunity to buy it yesterday. If you took a buy into that blue-shaded area, you’re looking for a break of this high here at 1.1195 or so and a turn back towards the 1.1234-level. That 50% retracement level.
As it approaches here, I would expect you’re going to protect profit. Lock in profit. That way, if it bounces on there as resistance in the bank flow levels, then we look for it to go back down. If you’re looking for a buy today, staying above the blue-shaded area and the blue trend line would be your best opportunity to buy it. Dip back down into support. I don’t think I’d buy it right now, but dipping back to the blue-shaded area and the blue trend line becomes your opportunity to buy it.
Clearly a profit target and a resistance, as we’ve discussed, right here into 1.1234. The red line. Breaking above there, of course we have a target all the way up into the 1.1300s. Quite a bit higher, but for right now that is our current resistance – right into that red line. The only thing that’s going to change this overall perspective would be a breakdown of the blue-shaded area, a breakdown of the blue trend line, and a change of the trending pattern. We go from higher highs and higher lows, which we have right now. We would now be looking for lower highs and lower lows, which we have not seen yet.
So, that would be a change of the trending pattern. It hasn’t happened yet. Still focused in on the buy side. If you bought it into the 1.1150s and 1.1160-level, then protect your profit as it tries to attempt to push through 1.1200. And of course beyond there, we’re back into the low-1.1230s for our next profit target for the USDCAD today.
