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I want to begin the day today on the Euro versus the US Dollar [EURUSD]. We’re going to start all the way out here on the Weekly Chart, and then we’ll go backwards to some of the smaller compressions. I want to go back to the far left-hand side of the chart. Something we’ve been studying in the Trade Room over the past several days is the historical support lows that we see here.
Bottom of the blue rectangle box that you see back here. Left-hand side of the chart. There’s a circle back here that we want to pay attention to. You could see the market did challenge underneath there, underneath the yellow-shaded area and the two red, horizontal lines, but could not sustain a breakout underneath there and pressured back up towards the top of the rectangle box, the yellow-shaded area, up towards the 1.2730s, 1.2740s, and 1.2750s.
Then we made another run, finally broke underneath it, and made a new low. Then it used that same area as resistance. So, historically we could see that that yellow zone, bottom of the blue box there has historically been significant for the EURUSD.
Take it on back to the current timeframe. You could see that same information back over here has also produced a support here for the EURUSD, finding support between the 1.2400 and 1.2360s. You could see the support there over the past two weeks, last week and so far this week, bouncing it right back up into this blue-shaded area. The blue-shaded area represents resistance because historically we could see some support right here, right around the 1.2500-level. And again, you could go back in time and see some confirmation of support, resistance, and congestion around that blue-shaded area and that price level of 1.200.
Above that, the pink-shaded area up towards 1.2600s becomes our next potential resistance. On the other side, a breakdown of the yellow zone, 1.2360 or so, we’ll look for a turn back down to the green-shaded area, into the 1.2200s, and that would be back down into the congestion you could see over here on the left-hand side of the chart.
A couple of Fibonacci levels I want to make you aware of. Taking Fibonacci from the lowest low to the highest high on the left-hand side of the chart. The long-term uptrend from the lowest low to the highest high puts the .786 fib right at 1.2459. That’s the bottom of our blue-shaded area, and we’ve been studying that in the Trade Room also. .886 of that same range sits all the way down in the green zone, so clearly a breakdown here. We potentially go all the way down here into the 1.2200s, but we haven’t really sufficiently seen a breakdown of that .786 fib here yet on the Weekly Chart.
Let’s go ahead and take it on down to the Daily Chart. You could see that pattern right now. The downtrend is clearly the main focus here for the EURUSD. It’s been in a downtrend for quite some time. Even the most recent lows or highs have been getting lower here for this pair, but we have been in congestion for six days I guess. We could call it under the blue zone, above the yellow-shaded area. So, we’re contracting. We’re in consolidation. The market is trying to decide what are we going to do with this. Are we going to break above the blue zone and go higher, find resistance, challenge the yellow zone and go lower?
The decision has not been made yet here for the EURUSD, so we’re watching for a breakout now of this pair. In the direction of the trend, if you’re trading the trend, you’re more likely focusing in on selling this currency pair. That would be here, underneath the 1.2500-level. Close as possible to 1.2475 to 1.2500 becomes a lower risk, higher reward intraday scenario for selling, and then you target all the way back down towards the yellow-shaded area and into the 1.2400s. So, a pretty decent amount of profit could be seen just trading between the yellow and the blue-shaded area as we’ve seen over the past five or six days here for the EURUSD.
Clearly a breakout above that blue-shaded area, we look for it to go back up towards the red trend line, the pink-shaded area and the next resistance higher, which is into the 1.2600s for the EURUSD. We have not seen any real challenge of the 1.2365-level. It pushed down there one time, but no real challenge of it. A breakdown of that, again, goes down to the green-shaded area.
Let’s take all that information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, we can look at a couple of different things here for this pair. A couple of days ago, we saw support levels with the bank flow. We haven’t seen any since a few days ago, but bank flow buy levels sitting down here in the yellow zone. Sell levels were well up here towards the pink-shaded area. Let’s go ahead and bring these arrows in a little bit closer.
We know this is resistance between 1.2475 and 1.2500. A breakout above that goes higher. And again, your support is all the way down here into the yellow-shaded area at the very bottom of the chart, just underneath the 1.2400-level. We can even, here on the 4-Hour Chart, take a little bit of a trend line like this. We could see the consolidation pattern. The triangle pattern that’s developing here. We can even take a trend line here on the bottom.
Right now, if you define a trend as lower highs and lower lows, it’s a downtrend. Higher highs and higher lows is an uptrend. Right now we see a little bit of confusion in trend analysis. We see lower highs, but higher lows. So, right now what we’re kind of looking for is that breakout, and that really coincides with everything we just talked about. The resistance into the blue-shaded area would be a breakout. We take it back higher, likely all the way back up there into the pink-shaded area as our next resistance target. It doesn’t have to do that though. If we see the bears take back control, breaking through the lows, we’re back down here into the 1.2400 or even 1.2360-level as our next support low.
So, really what we need to see today is a breakout of this symmetrical triangle. Let’s do one more thing. Let’s take Fibonacci from this high right here, where the red trend line connects at the top of the yellow-shaded area, down to the current support low. And just taking Fibonacci like that, we see the .382 Fibonacci retracement level at 1.2515. Top of the blue-shaded area. So, clearly a breakout of our last resistance highs, a breakout of the triangle pattern, a breakout above that .382, we’re likely looking for a turn higher. .618 of that same range sits back up there, right at the pink-shaded area. You could see right at the bottom of the pink zone, .618, 1.2612. So, again, that becomes our potential resistance.
For the day today, if you’re looking for intraday trading opportunities, I don’t think I would forget about the trend. That the longer-term trend is still there. If you’re looking for intraday trading opportunities, sell it as close as possible to 1.2475, 1.2485, the blue-shaded area. Target lower levels in the direction of the trend. Your risk in that scenario of course is that it breaks above 1.2500, so keep that in mind. If you decide to sell it, a breakout above 1.2500 likely looking for a turn back higher again. Then you could flip your position. Start buying, targeting back to the pink zone. If you want to continue to concentrate in the direction of the trend, you’re probably not going to turn into buys. You’re going to wait for it to reach that pink zone before you sell it again for the EURUSD over the next couple of days.
