USDCAD Watching for Resistance and Reversal

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Transcript of Video
I’m going to get started today on the US Dollar versus the Canadian Dollar [USDCAD]. I’m going to start all the way out on the Monthly Chart. I think it’s important today to take a look at history first, before we go down to the smaller compressions.

Monthly chart. We go all the way back here to the left-hand side. 2009, top left-hand side of the chart, beginning of a long-term downtrend. Went from the mid-1.3000s, all the way down here into the 0.9400-level. So, a long-term downtrend. First thing about that, of course, taking Fibonacci from the highest high, down to the lowest low of that downtrend. The most important part about that, that we need to see is the .618 Fibonacci retracement level of that previous downtrend sits at 1.1665. And that’s going to be right here, where that yellow top-shaded area is. The yellow-shaded area. Horizontal, red line in that zone is where the .618 fib is of that previous downtrend.

The other important aspect about that is if you follow that red line and yellow-shaded area back, is the last time we were here – keep in mind that this is the Monthly Chart – the blue circle on the left-hand side. We found two month’s worth of resistance around that yellow-shaded area, so a long time finding resistance there. So, .618 of the previous downtrend. Two months resistance here. You can even go back to the left-hand side of the chart and see some support in that same level.

So, very important. Yellow-shaded area. Red trend line, or red, horizontal line and the .618 fib as an area of resistance. Of course if it gets above there, we look for it to continue to go up, but we will expect this will have some resistance here into this level.

Let’s go ahead now and take it down to the Weekly Chart. Get a little bit of a closer view. Of course we can see the current market coming right up into that yellow-shaded area. Not quite there yet, but coming very close to it so far. I want to zoom back in time here on the Daily Chart. Take a look. The last time we were here. Again, back to 2009, there’s that same circle we looked at on the Monthly Chart. Look, four weeks finding resistance there into that same .618 fib, 1.1665, and eventually was the reversal point for this to go back down in the direction of the previous downtrend. You could see some support over here on the left. Support. Resistance. Very important price level here right around the 1.1600 to 1.1665 level for the USDCAD.

Let’s take it back to current time. Again, we’re coming very close to that. Of course we’ve clearly been in a long-term uptrend. We need to keep in mind. If we’re going to be buying, be very discouraging about buying it under 1.1600 and into that historical resistance, but if we want to buy it, it needs to go down first before we’d even consider buying it.

Let’s go ahead and take that information down to the Daily Chart. And as we get down here, we can see the trend, how it’s been rising. Higher highs. Higher lows. Nothing new there. We’ve talking about that for days and days in the Trade Room. The red trend line. Very important. We connect the last two resistance highs with that red trend line on top. We’re coming right into that same area. So, if we look at this as a rising wedge or whatever you want to look at it as, you could see the resistance within the uptrend coming right into that same 1.1600-level along that red trend line.

Blue trend line representing the higher lows. Not as close and that would of course become your first potential support point within the trend and within the pattern that we’re looking at right now. So, that support right there, closer to the 1.1500-level. Not anywhere close to that. And of course as we’ve been discussing, our resistance is here at the yellow-shaded area, red trend line, red, horizontal line. .618 fib. 1.1665. So, as we boil all that information down, it becomes apparent that underneath 1.1600, 1.1665, it would be very discouraging about buying it because there’s a great expectancy of resistance here. An expectancy that we could find a barrier that the market can’t break through and we look for some potential reversal. Maybe short, but maybe long.

Similar to what happened here in the green zone. We saw it hit there, found a barrier of resistance, and fell down. Very short period of time relatively speaking, and then went back in the direction of the trend. So, again, if you’re going to buy it, where do you buy it? You buy it into support, like what you found here. If you’re going to buy it, you need it to go down, back to 1.1500 if that’s going to be your best opportunity.

Clearly if it breaks above 1.1665, 1.1650, we could look for this to go higher, but definitely expecting resistance here. Very discouraging about buying it right now, close to the resistance, but more likely watching for clues and evidence of resistance and potential reversal here for the USDCAD today and maybe even this week.

Let’s take it on down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, of course we do see the Forex Black Book has turned back to green again this week and it’s been going up, so it’s not too terribly difficult to understand that that turned green. But again, even with the Forex Black Book, and we discussed this on the GBPUSD late last week in the Trade Room. Even with the Forex Black Book indicator, if it’s a green bar, you expect to be buying, but you want it to go down. You want it to go down, find support, give you a green arrow.

Take a look at where the green arrows come. They come after a dip lower. Take a look at the bullish, yellow arrows. They come after a dip lower. It goes down, yellow arrow, goes up. It goes down, yellow arrow, goes up. So, even if you’re going to buy this in the direction of the Forex Black Book trend bar, you want it to go down first and give you a bullish or buy signal before you would buy it. So, I expect it needs to go down, closer, likely, towards the 1.1500-level before I would consider a new buy scenario here for the USDCAD.

As long as it’s inside or under this yellow zone, it would be my expectation that we’re looking for resistance and reversal evidence here for the USDCAD today and throughout the rest of this week.

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