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I’m going to get started today on the US Dollar versus the Swiss Frank [USDCHF]. Starting here on the Daily Chart, over the past several months, we’ve been studying the long-term downtrend. Coming from the highest high into the mid-0.9700s, falling all the way down to the lowest low of the trend, into the 0.8700-level at the bottom of the chart.
Since reaching that low, we’ve gone into a bit of a contraction pattern. That’s what I’m going to call this. It’s contracting because we see the lows getting higher along the red trend line. It’s not a continuation pattern of the downtrend, which we could expect to see lower lows and a downtrend, but we actually see higher lows along the trend line. But we also still see the lower highs along the blue trend line in the downtrend pattern. So, lower highs and higher lows. We’re contracting inside somewhat of a triangle pattern down here at the bottom.
Now, at some point, we will expect to see a breakout. It will either break below the red trend line to continue the downtrend or above the blue trend line, the last high to continue uptrend. But until then, we’ll be watching for dips into support or rallies into resistance become our intraday trading opportunities.
Let’s go ahead and zoom it in here a little bit here on the Daily Chart. We could see the yellow-shaded area and the red trend line. The rising lows within the contraction pattern that we’re seeing right now. So, for the day today and maybe even the rest of this week, we’ll have to see; we’ll be looking for support here into the red trend line, the yellow-shaded area, between 0.8755 and 0.8775. It’s about a 25-pip zone highlighted in yellow. That will be our support for this week.
You go back in time. That’s the last support. As long as it stays above this last support, we still have higher lows within the pattern. If, at any time, it breaks out underneath that yellow-shaded area and underneath that red trend line, of course we’ll look for the continuation lower, back to the lower lows on the chart. On the upside, if it does take a bounce here, as expected for the day today. Taking a bounce here at the red trend line, yellow-shaded area, we look for it to go back up to our next resistance, which would be here into the purple-shaded area.
Let’s go ahead. The purple-shaded area will be our resistance for the day today. So, outlining this, 0.8755 to 0.8775 is your support. That’s the yellow-shaded area. Resistance will be the purple-shaded area. That’s 0.8812 to 0.8830. It’s, again, about a 20-pip zone highlighted in purple, just above the market, and that will be a resistance. Anything above that purple-shaded area and above the blue trend line, we’ll look for it to go to the green-shaded area and challenge our last resistance high. Anything above that, we’ll look for a continuation higher into the black trend line and the blue-shaded area for the USDCHF.
Let’s go ahead now and take this down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, what we’d be looking at is, first off, is the Forex Black Book. The Forex Black Book trend bar at the very bottom of the chart is green, which gives us a bullish or uptrend bias. Now, as we’ve seen along that red trend line, I actually will zoom it out a little bit so we could see the full red trend line. Along that trend line, we see rising lows. So, as long as it stays along the red trend line and in the rising low pattern, I’m looking for support. With the Forex Black Book, that also gives me a bullish expectation.
Now, when we’re looking for signals or buying opportunities with the Forex Black Book, what we’re going to be looking for are the green arrows. We do see a green arrow here. It happened several hours ago, as the market capped out into the purple-shaded area, so I’m not really considering this. As I spoke about in the Trade Room on Friday, I actually expected that the yellow-shaded area would be our best area to buy it. If you don’t remember that, go back to Friday’s Trade Room recording and you’ll remember me talking about the yellow-shaded area as the better area to look for a buy opportunity rather than all the way up here into the purple-shaded area. So, it’s reached into there.
So, I’ve already taken a buy here into the 0.8775-level, now looking to target back up here into the purple-shaded area for the USDCHF. The risk in that scenario on any buys that you might take into the yellow zone is that it breaks underneath and continues down to the green zone. So, that’s the risk. It’s fairly tight risk for anybody that decides to go ahead also and take a buy here into the yellow-shaded area.
Staying above there, I’m focusing my efforts back to the purple zone. And of course, above there, we’ll look for further profit as it goes back up. If it breaks under the yellow zone, we could begin shifting our focus again back to the sell side, but I will definitely be looking for an open and close, clear break underneath the yellow zone, 0.8755, before I expect it will continue to pressure lower. So, what I’d actually like to see today: green trend bar Forex Black Book and I’d like to see a couple more green arrows built here into the yellow zone.
Sometimes, if you go back to the left and go all the way back to left, down into the green-shaded area, bottom left-hand side of the chart, you see the two green arrows as it made support on top of the green zone, bottom left-hand side of the chart. So, that’s actually what I’d like to see over here on the right. I’d like to see it settle out as support here, yellow zone, maybe give us another green arrow and a new buying opportunity as we look for it to go back up towards the purple zone or higher. At least as long as it stays above the yellow zone, I’m not looking to sell this today, because there’s a great expectation of support here. If I’m considering a sell, it would have to be either underneath the yellow-shaded area or back to the purple-shaded area today for the USDCHF.
Next thing is the bank flow levels. The bank flow levels here over the past several weeks have implied support. Buying support here. You could see, even Friday, there was some buying support up here in the purple zone. It did hesitate there last Friday. It stayed above that level. Then, after market opened this week, we saw the dip back down to the bottom of the bank flow zone. And again, on Friday, I suggested that the yellow area would be a better area to consider anyways for buying. So, I would suspect that today’s bank flow levels will once again come back down, like they did several days ago, here into the yellow-shaded area for the USDCHF today.
