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I’m going to begin the day today on the US Dollar versus the Canadian Dollar [USDCAD]. Starting on the Daily Chart, we can see that this currency pair, for quite some time, has been in an uptrend. We go all the way back to the left-hand side of the chart; we see the continuation of the uptrend, higher highs and higher lows, as it reached all the way into the highest high, into the 1.0700-level. And over the past couple of weeks, several days, we’ve seen the market fall off the highest high and dip back down into support, into the purple-shaded area at the top right-hand side of the chart.
Follow the purple-shaded area backwards in time and we could see some historical resistance highs here. The two vertical dashed lines representing these last two areas where we found resistance. Multiple days finding resistance in these last two times. And of course, coming back down into that became support over the past five days or so.
If you’ve been following along in the Trade Room, you’ll know that I took buys down here into the purple-shaded area a couple of different times and has now captured profit on two different trades. The first one rising into the yellow-shaded area. Second entry pushing back up there into the yellow-shaded area again. Profit is captured on those two entries and if you’re still following along, you would want it to break through this yellow-shaded area and challenge the green-shaded area, which is the highest high. And of course, above that we’ll look for a continuation of the uptrend.
The only thing that will change this scenario for me is that if it breaks down through the purple-shaded area, we’ll likely look for it to continue lower. So, as we approach the higher highs, a break of those higher highs, we’ll look for it to continue higher. Those are the two main things we’re looking at right now. Support into the purple zone. Resistance here, into the yellow and green-shaded area. Of course today we’re approaching the green and yellow-shaded area. There is some potential resistance there. Historically that’s accurate, and we’ll look at that in more detail on the 4-Hour Chart.
So, down here on the 4-Hour Chart, first off, let’s take a look at the Forex Black Book. The Forex Black Book trend bar down at the bottom of the chart has been green for some time, representing of course the current trend that we’re in. We see, over the past several weeks, we’ve seen this downward slide as it pushed back down to the purple-shaded area. It turned dark green, so the longer-term trend and shorter-term trend were in disagreement. That’s why it was dark green. The longer-term trend still being bullish.
Now, today, with this bullish movement, we see that the trend bar has turned bright green again, so that gives us a clue that the trends are starting to turn back in agreement to go back up again. So, what we’re looking for is if you bought it down here in the purple-shaded area, if you bought it down here, then you’re looking for a push through the resistance, through the yellow-shaded area, through the green-shaded area, and a continuation of the uptrend. And that is confirmed by the trends coming into agreement with the bright green trend bar for the Forex Black Book chart.
Even though it’s bright green now, it doesn’t mean that this is an ideal opportunity to buy it. Remember: buy low, sell high. You don’t really want to buy it as it’s reaching into a high point here. We can see that the last time we were here, in the yellow-shaded area, we found resistance. Prior to that, we see this congestion in this yellow-shaded area. And of course, just above that, the last spike resistance highs here into the green-shaded area. So, buying it right now becomes much more dangerous that the market finds resistance and, once again, falls back down to the purple-shaded area.
What we’re looking for, if you’re not already in a buy and you’re looking for a buying opportunity, is that we want to see these resistance. Think of them as a price ceiling or a brick wall in the market. We want to see the market push through these levels. Then our expectation that it will continue to pressure higher becomes increased. So, that’s what we’re looking at today. We’re not buying it now. We’re too high into this right now to buy it. But more likely looking for a breakout above the resistance for a continuation of the uptrend. Otherwise, there are some low risk, high reward scenarios for selling here into the yellow-shaded area and the green-shaded area.
Specifically the yellow-shaded area right now. I’ve attached the last two highs with this black trend line, and you could see that that is where the current market is coming into play as resistance. 1.0645 to 1.0650 – that is our current resistance. The yellow-shaded area. The black trend line comes into play there. Yesterday’s bank flow levels. We could see that they were just underneath the purple-shaded area and just here into the green-shaded area. It’s more than likely that with this bullish movement that we’ll likely see those bank flow levels raise up a bit today. The buy levels closer into the purple-shaded area and potentially the sell level is a little bit above the green-shaded area, but I would expect that it wouldn’t be too much different from today, but definitely expecting them to be a little bit higher.
But definitely watching for resistance here. 1.0650. That is your current resistance. Let’s actually take this down to the 1-Hour Chart. And as we get down here to the 1-Hour Chart, we’ll see of course that same resistance level. I need to squeeze it out there. Same resistance level sitting there into the yellow-shaded area. Let’s take two different Fibonacci retracement measurements. First off, I’m going to go to the highest high. So let’s go to the highest high that we see on the left-hand side of the chart down to the lowest low. And that puts the .618 fib right at 1.0650.
All right, that’s the bottom of our yellow-shaded area. So, that gives us a pretty good expectation that we’re likely to see resistance along this black trend line and into the 1.0650-level because we have Fibonacci there. Let’s actually take a shorter one and let’s just go from this high right here where it spiked into the yellow-shaded area to this low here. And we now see the .786 fib sitting right here at 1.0647. That, again, right at the bottom of that yellow-shaded area. So, this little, short leg here. The longer leg from the highest high to the current low. We see both Fibonacci 1.0647 and 1.0650. Bottom of the yellow-shaded area. Highly likely to see some resistance there.
So, let’s go ahead and bring these arrows even closer to the market. As long as it holds within or underneath that 1.0650 or so level, there’s potential to find resistance and work its way back down again. If it breaks above these Fibonacci levels and that yellow-shaded area, of course we’ll look for it to push back to the green zone. And of course, above the green zone, a continuation of the uptrend. So, your major decision point right now: if you’re in a buy from down here in the purple zone, if you bought it down here in the purple zone, then you are using this as a profit target. This is your target and you should be either bringing your stop up to protect profit or closing profit.
If you’re not in a buy, you don’t want to buy it right now. Too much indications of resistance here. You’re more likely looking for short-term selling for a possible retracement back down again, being quite aware that you’re trading against the overall trend if you do that. And a break above this yellow-shaded area likely sees the surge back towards the green zone for the USDCAD today.
