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I’m going to get started today on the Euro versus the US Dollar [EURUSD]. I’m going to start here on the Weekly Chart. All the way on the left-hand side, we started the uptrend that began all the way back here in July of 2012. We started the uptrend down into 1.2030, 1.2040, at the bottom left-hand side of the chart, continued to pressure higher over the next couple of years, pushing all the way up to the top of the chart into May of 2014, this year, close to the 1.4000-level.
Then, in May, we began a downtrend that pushed all the way back down here towards the bottom right-hand side of the chart into the 1.2500-level. Now, it’s been a significant downtrend with very little – not without any, but with very little – pullback or retracement. I have a couple of areas here highlighted with the red trend lines, where it pulled back a little bit here at the beginning of the trend, and then it was just a dramatic fall from there. And most recent weeks, we’ve seen a little bit of a further pullback and now continuing to push down in the direction of the downtrend.
The question of course is: are we going to see a continuation of the downtrend or will we eventually finally see more of a major pullback for this currency pair? Also, back to the left-hand side of the chart, if we take Fibonacci from the lowest low to the highest high, just of the long-term uptrend that we have here, the .786 Fibonacci retracement level sits at the top of this yellow-shaded area. I have two red, horizontal lines at the very bottom yellow-shaded area. The top red line is right around that .786 fib at 1.2459, so that also helps us identify where the next potential support will be if we continue to pressure down without any further retracement here for this currency pair.
So, we’ll want to keep that in mind as we go through our analysis on a daily basis over the next couple of weeks, especially if we see the breakdown of the low. Let’s go ahead and take it down to the Daily Chart. Take a look at what’s happening this week. Over the past few weeks, we’ve been studying this upward channel. We studied how it was retracing back within that channel, found resistance into the green-shaded area, broke the red trend line and underneath that flag pattern or that channel.
Broke underneath it last week. Early this week we were talking about potential selling opportunities into the yellow-shaded area and into the 1.2700s. The mid-1.2700s as it challenged underneath that red trend line. If you decided to take a sell there into that red trend line and that yellow-shaded area, it’s been quite profitable now as it pushes back down into the 1.2500s. Clearly our last support low that we see here on this chart before reaching down into the 1.2400s would be this blue-shaded area, and we can see the past couple of days just shying away from that blue-shaded area.
The blue zone is 1.2510 to 1.2540, so about a 30-pip zone highlighted in blue. That will be our intraday support. As long as it stays above there, I would be very discouraged about selling on top of that blue-shaded area. It doesn’t mean we can’t sell it, but selling it while it’s sitting on top of that price floor, that support becomes very discouraging because historically and currently we are finding support and a very difficult time breaking through that 1.2500-barrier that sits there. And then of course, as we just pointed out a few moments ago, if it does, we already have an idea of where it’s going, back down here, where these two red lines are and that .786 fib from the longer, weekly trend range.
Now, if it does find support here and starts moving back higher, we will likely look for some resistance. Pink zone, yellow zone, maybe the green or the blue zone all the way up here towards the blue trend line, but definitely have some upward targets that we’ll shoot for if it does find that support. So, today, very discouraged about selling into the blue zone, but a breakout underneath it, we already have an idea, another 50, 60-pip push down into the .786 fib for the EURUSD.
Finding support above it does provide an intraday short-term buying opportunity. As long as it stays within or above 1.2500, 1.2530, as long as it stays within that blue zone, there is some short-term buying opportunities with very limited risk, and really that’s what it’s all about in trading; is finding scenarios that are lower risk.
Now, there’s going to be risk in every trading scenario. You’re never going to enter a trade where there’s never going to be risk. There’s always risk. Whether you’re buying or selling, within an uptrend or downtrend, there’s always risk. So, what we want to do is find low risk. So, sitting on top of the blue-shaded area, there’s a high risk of support to go back up. So, you don’t really want to sell it on top of there, but more likely the lower-risk scenario the closer you get to that blue-shaded area may be for intraday buying opportunity as long as it stays within or above it.
If it breaks it, that’s the risk, and then you look for it to continue to go down. If you’re going to sell it, you want to sell resistance here for the EURUSD. Let’s take it on down to the 4-Hour Chart. Take a look at some of those areas of resistance. Here on the 4-Hour, we could see the past day or so finding congestion here into this orange-shaded area. We can see historical evidence of support and resistance inside that orange zone also. That goes between 1.2578 and 1.2600. So, for the day today, think of this orange-shaded area kind of like a hinge point in the market.
It’s a hinge point. So, if we were to take these arrows, put it here and put it here, and let’s put two more arrows above 1.2600, goes back up. Below 1.2600 has potential for resistance to go back down. We could see evidence of that over the past several hours. A push back above 1.2600, we’re back into 1.2640, 1.2650, 1.2660, the pink-shaded area as our next resistance.
Now, here’s something that’s going to come into interest for those folks that watch the bank flow levels. Take a look right here at the very bottom of the chart. This is back. Yesterday we see bank flow buy levels popping up for the first time in quite a long time. You squeeze it back here. You see no buy levels for a long time. Only sell levels on top of the market. So, for the first time in quite a long time, we see buy levels popping into the market. That could be our first clue of the buyers beginning to step back in here for the EURUSD, close to the 1.2500-level.
So, the blue zone we know is historical support. The bank flow levels from yesterday now sitting into the low-1.2500s now gives me our first evidence that we could be looking for support and reversal here for this currency pair. Now, clearly a push underneath 1.2500, we look for the breakout and the continuation of the trend, but definitely a clear area that we need to pay attention to in the blue-shaded area above 1.2500. Now, if you’re going to sell this, look for it back to the pink-shaded area. Resistance there will likely be seen given the support we saw there or potentially even as high as the yellow zone again for selling opportunities.
The higher it gets, the better. The lower the risk. Think about this. With the exception of this last little high here, where’s the last swing high? With the exception of this high, it’s all the way up here in the yellow zone. If you’re using that as a potential risk factor, as your stop scenario, quite a large way up. You want it to go up before it goes down here for the EURUSD today.
