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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, we really have two different trends we’re going to contend with today. First off, the previous uptrend on the left-hand side of the chart, going from the lowest low on the chart, down here at the bottom of this red trend line, to the highest high on the chart. That’s the first trend we’re going to contend with. That is of course an uptrend.
Within that uptrend we’ve seen a few times where the market went into periods of retracement or congestion. You could see that circled here. The bottom blue circle went down a little bit or retraced a little bit, and then went back up in the direction of the current uptrend. Then it went into this period of congestion, the second blue circle, where it bounced around for several days between the orange and the green-shaded area. Finally found support. Broke to the topside. Continued the uptrend.
And then there’s another period right here. Don’t have it circled, but it’s right there between the green and the yellow-shaded area. It went between resistance in the green zone and support in the yellow zone for several days. Again, this is the Daily Chart, but several days bounced around in here in congestion, eventually broke to the topside, and continued the direction of the uptrend. So, that’s the pattern that we’ve found within the previous uptrend.
I’ve also taken Fibonacci retracement measurements from the lowest low of that trend to the highest high, which, interesting enough, puts the .382 still a little bit lower here for this trend, all the way back down here into the yellow-shaded area, into the 0.9300-level. The .236 sits at 0.9453. That’s right about where the current market price is, so that’s an interesting look at the previous uptrend. Now, recently, over the past several days, a couple of weeks, we have seen a downtrend take hold here for this currency pair. And I said at the beginning we’d be looking at two different trends here, the previous uptrend and the current downtrend.
The current downtrend, which is basically a retracement of the previous uptrend. We could see it pushing down from the highest high on the chart, into the upper-0.9600s, towards 0.9700, and then pushing all the way back down right now into the 0.9400s, but it’s been as deep as the 0.9300s, down here into the green-shaded area. For the past few days really, if you could today, five days. The past five days we’ve continued to find support into the green-shaded area, which historically that we saw right here was resistance. So, this resistance helping us identify that current area of support in the green-shaded area.
The blue zone just above the current market has held as resistance, and we could see some support on top of that blue-shaded area back here on the way back down. So, we have a zone of resistance. A zone of support. We have the previous uptrend and the current downtrend channel. If you’re familiar with charting patterns, you may be able to interpret that as a flag pattern, where it’s come back down. And if we’re going to see a continuation or a breakout of that flat pattern, we’d of course look for the breakout to the topside of the blue-shaded area and a continuation of the uptrend, but there’s of course never any guarantee that that’s what’s going to happen. We could literally be in the new formation of a downtrend here because it’s been going down for the past several days.
Forex Black Book trend bar over the past several days has been red, showing bearish price action. We can see that up here at the top of the chart. Trend bar is red. Been going down. There’s nothing new there, but if you’re going to look for new opportunities in that direction, of course we’ll talk about opportunities to sell into resistance. If you’re looking for buying opportunities in the direction of the previous uptrend, of course we’ll always look for buys on dips into support or breakouts above resistance.
Let’s take all of that information now that we’ve garnered from the zoomed out view here on the Daily and I’m going to zoom in a little bit. We could see that same little downtrend channel. You might call that a retracement channel. You might call that a flag. It depends on how you want to define it, but I still think there’s really two areas that we need to pay attention to for the day today. That would be of course support into the green zone, which we just talked about, and we can see that over the past five days. That’s between 0.9400 and 0.9360. We could see that support. If you’re going to buy this currency pair, that becomes a very low risk, high potential reward opportunity to buy it.
Just think if you would’ve bought it earlier today at 0.9410 or so, you’d be sitting with profit as it now approaches the resistance. As it approaches the blue-shaded area, we know there’s potential resistance there. We’ve seen that over the past four days. So, as it approaches it, it becomes very discouraging to buy it because there’s a high probability of resistance there. If you were going to buy it, you wanted to buy it down here. You don’t want to buy it under that blue-shaded area. Now, there is another reason to buy it, and that would of course be the breakout above the blue-shaded area.
We’ll call it a breakout above 0.9500, give or take a few pips either side of that, but a push above 0.9500, the blue-shaded area, the red trend line, that of course gives you a clue that it’s going to continue to pressure higher. Until then, we’re absolutely potentially going to see resistance into that blue-shaded area, and it does become an intraday selling opportunity if you’re looking for the continuation of this downward-facing channel that we’re seeing here for the USDCHF.
Let’s take all that information now down to the 4-Hour Chart, and there’s the same red trend lines. There’s the same blue-shaded area. There’s the same green-shaded area. And as you could see, if you would’ve bought the green-shaded area on the challenge back down here at the very bottom, then you would be in profit right now and you’d be protecting profit rather than trying to hope for it to continue to pressure higher.
That’s the biggest thing I try to point out in the Trade Room every day; is that if you buy it into support as it approaches resistance, you’re not saying, “Well, should I buy it because it’s going up? What if it doesn’t continue to go up?” You’re not worried about that. You’ve bought it at the lower level. All you’re doing now is protecting profit as it approaches that blue zone and you’re not even considering buying with this bullish movement that you’ve seen right here.
Now, we could see here on this chart. We do see over the past several days we have had bank flow levels right here into the blue-shaded area. Even yesterday levels coming out a little bit late in the day yesterday, but we could see them here into the blue zone. So, clearly what we’re looking for today and I think as long as it stays within or even towards the top of that blue-shaded area, but within or below that blue zone, we’re looking for resistance and intraday selling opportunities. The risk, and there’s risk in every trading scenario. The risk is that it breaks above 0.9520 or so, above the blue zone. Then we look for it to go all the way back up here to the purple-shaded area at the top of the chart.
So, if you’re looking for a trade opportunities at the very current moment, you’re not buying because you’re running into a price ceiling, into a resistance, into a trend line. So, you’re not buying right now. You’re more likely looking for selling opportunities as it approaches the blue-shaded area with your risk, stop loss just above 0.9520. That way if it breaks out, you don’t stay in a losing position. If you bought it in the green zone, all you’re doing now is protecting profit. Selling into this. Buying into this. That’s the best opportunities.
One last thing here on the 4-Hour Chart that I want to do. Let’s take Fibonacci from the highest high on the chart, all the way up here at the top in the pink zone, down to our current support low. And in doing that, very interesting, the .382 Fibonacci retracement level of that current downtrend that we’ve been in sits right at the bottom of our blue-shaded area, right around the 0.9485-level. Right at the bottom of that blue zone. So, again, this become 0.9485, 0.9490 becomes an opportunity, first off, for profit for anybody buying from the green zone, but also a target for resistance and an opportunity to sell this currency pair. Clearly at some point in time, if it breaks above that blue zone, we’re breaking out of this pattern and we look for it to go higher. That’s the risk on any sells that you might take today for the USDCHF.
