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I’m going to begin the day today on the US Dollar versus the Swiss Frank [USDCHF]. First off, starting here on the Daily Chart, I want to take a look at a few different trends. First off is the blue trend line that we see here. The shorter blue trend line coming from the most recent high here into the mid-0.9400s. As the market continued to pressure lower, that down trend line continued to go down until it bottomed out down here, into the upper-0.8900s towards the 0.9000-level down into the pink-shaded area at the bottom of the chart.
Within a down trend, of course, we can recognize a pattern of price, which is lower highs and lower lows. Then, when that pattern begins to change, we begin to change our trending focus. And in the most recent days, we’ve seen a change of this trend pattern – the blue trend pattern. It’s now turned to higher highs and higher lows, and I’ve placed a black trend line here to represent that change in the pattern. So, we saw the breakout above that blue trend line. We started seeing higher lows. Then, over the past three or four days, we have seen a new high being made as it broke above this yellow-shaded area. Making new highs, so higher lows and higher highs. We begin to take shape in the direction of an up trend.
So, we could see a change in the pattern of the price. So, what we’re looking for now is a continuation of the up trend. As long as it stays above that black trend line and continues to create higher highs and higher lows, that’s the direction we’ll now begin to focus our efforts on. Buying on dips into support and breaks of resistance. Now that we’ve seen those two trend lines, I actually want to adjust this one here – the blue trend line – and let’s take it out even further. Let’s bring it all the way up to this highest high and connect it with the most recent high here.
If we bring that into play we could see that, currently, the market still sits underneath that. So, it’s my expectation that, as long as the market stays above the black trend line, which is the bottom bullish trend line, and below that blue trend line, there is potential to find resistance, but there’s plenty of room between current market price and that blue trend line for us to see some profitable potential on the upside if it continues to go up in the direction of the black trend line. And then, if we can get in at a low point and protect that profit, maybe over time, if it breaks through that blue trend line – the bearish trend line -, we look for a continuation of the up trend, or that also becomes a potential profit target.
Now, first off, let’s take a look at horizontal support and resistance, or next let’s take a look at that. Following this blue-shaded area backwards in time, we can see some consistent price behavior. We could see resistance over the past three or four days here, as resistance into the 0.9125/0.9130-level. We can go back several days ago. I have it highlighted in this orange box, which we’ve been looking at in the Trade Room over the past few days. This resistance here into the 0.9125-level. The support into the orange level, which, again, is duplicated over the past three or four days that we can see.
Follow that blue-shaded area backwards in time; we could see some support here, just a spike low into the topside of that blue-shaded area. Here’s another recognition of that price level as support over here with this spike low. Then we go all the way back to the left-hand side and we could see some historical support over here on the left-hand side and in that blue-shaded area. And I can go back in time, even further. The further back we go, we can see some more historical support and resistance around that blue-shaded area, and we’ll likely do that later on in the Trade Room today.
So, it’s my expectation, as we’ve seen back in the past, as long as we stay above that blue-shaded area, there’s potential to continue to pressure higher. Now we’ve seen that as support on top of that blue-shaded area, where we continued to pressure higher. And even over here, on the left-hand side where the market was underneath it, challenged down here into the yellow-shaded area, finally got back above that blue-shaded area, used it as support, and then continued the up trend. So this is something very similar to what we’re going to look for now; is if we can hold above the blue-shaded area, which has, over the past three or four days, been our resistance, and above the black trend line, we’ll be looking for buys on dips into that support.
So let’s go ahead and put a black arrow here. This becomes our major focus for the time being. As long as it stays above this blue-shaded area – and I’m going to try and drag that blue-shaded area over a little bit further. As long as it stays within or above that blue-shaded area, I’m going to look for support into there and possible buy scenarios to target, at least, back to 0.9200, the green-shaded area, and where this now bearish blue trend line comes into play. So, the green-shaded area at 0.9200 is our target for any buys that we take above the blue zone. Our risk in that scenario is that it breaks underneath that black trend line and that blue zone and continues to pressure lower.
Let’s take all of that information down to the 4-Hour Chart. And again, over the past three or four days and even into yesterday’s Trade Room, my suggestion was to look for support into the yellow-shaded area, resistance into the blue-shaded area. More likely looking for support into the yellow-shaded area and buying opportunities down here into the mid- to upper-0.9000s. If you took that suggestion yesterday from the Trade Room, buying down here into the mid-0.9000s, you’ve seen quite a decent amount of profit as it’s now pushing into the mid-0.9100s.
We’ve been studying this area of congestion. The darker orange area over here on the left-hand side, looking for a duplication of support into the top of the yellow-shaded area, and that’s exactly what happened and now we’ve pushed higher. Those resistance – top of the orange-shaded area over here, bottom of the blue-shaded area over here. Those areas of resistance into the low-0.9100s, into the blue zone, now become our support. If we can open and close – and of course, I’m still waiting for an open and close above here, but if this clearly opens and closes above this blue-shaded area, it easily becomes the area of support that we’re going to be looking for, so that’s exactly what I would look for.
Now, of course, if you bought it down here into the yellow-shaded area – as of yesterday’s Trade Room, if you bought it down there – then of course all you’re doing now is protecting profit and waiting for the next surge as it pushes back up here towards 0.9200 and the green-shaded area, so that’s exactly what you’re doing. If you bought it down here, protecting profit, looking for the next surge up to 0.9200. If you didn’t buy it, you’re waiting for the dip, the hold above the blue-shaded area, support into the blue-shaded area, and a turn back up towards the 0.9200-level. The only thing that will change my perspective here, again, is that we’ll see a break underneath the blue-shaded area, underneath that black trend line. Then, of course, we’ll likely looking for a turn back down in the direction of the longer-term trend for this currency pair.
I have taken Fibonacci retracement measurements from the current high to the low that you see here on this 4-Hour Chart. That puts the 50% retracement level right there into the middle of that green zone. It also puts the .382 fib right here at 0.9150 – the top of the blue zone. So, again, holding above 0.9150, above the blue zone, that becomes support. Above that Fibonacci becomes support. We look for a rally back to the 50% into the green-shaded area, which is into the 0.9209-level. And of course, a continuation there goes all the way up to the .618, all the way into the 0.9260s. The main thing I’m trying to get across here is that my focus is for the buy side. As long as we stay in the pattern that we’re seeing right now – higher highs and higher lows – that’s the direction I’m going to continue to focus on for the USDCHF today.
