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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. Starting here on the Daily Chart, we go all the way back to the left-hand side of the chart. We began the long-term uptrend back in June of 2013, all the way down here into the 1.2750s. We began climbing and over the past several months have pushed all the way up into the mid to upper-1.3900s at the very top right-hand side of the trend and at the top of the chart.
Now that’s one trend that we can observe. The second trend that we can observe of course is the short-term downtrend that we’ve seen. Since capping out at the highs into the upper-1.3900s, we’ve seen a fall over the past couple weeks, pushing it back down into the 1.3700s. The question of course is: are we seeing a change of the trend and a downtrend trying to take hold or will we eventually see a return of the overall long-term uptrend?
Well, through the life of the uptrend, we’ve seen many times where the market pressured lower and then returned in the direction of the uptrend. Pressured lower. Back up. Pressured lower, and then making a new high. So, it’s not too hard to believe that at some point we could find support and this will turn back in the direction of the uptrend, so we would be likely looking for buys on dips into support if that would be the case.
Now, if this is going to be a downtrend and we’re going to start to see a change of the trend with the short-term downward pressure that we’ve seen, then of course we’d likely be looking for sells on rallies into resistance to give us a lower-risk opportunity to sell in the direction of potential trend change. So we’ll continue to watch for clues in both directions to give us our best opportunities to enter the market.
Let’s go ahead and zoom in one time here on the Daily Chart. We can get a little bit closer view of this downtrend that we’ve seen. We could see that the Forex Black Book trend bar at the very bottom of the chart has turned red with this downward pressure. It’s gone red, giving us a bearish bias for the time being. Now, that doesn’t mean it can’t go up and eventually we would see this turn green again, but for the time being we see some bearish bias, which leads us to look for opportunities to sell on rallies into resistance or on breaks of support. Eventually, if it breaks those resistance, we could see it turn green again, but for the time being the bias is to the bearish side for the EURUSD.
Over the past several days, we have seen a little bit of an upward pressure. Again, this is the Daily Chart. We’ve seen it going down. Some upward pressure rallying into resistance. This blue-shaded area right now holding as our resistance. Yesterday holding there and, once again, today holding here into the blue-shaded area. That sits just underneath the 1.3800-level. The bottom of the blue-shaded area.
One last thing here on the Daily Chart. Taking Fibonacci from the highest high down to the current low. Highest high on the chart to the most recent spike low that we’ve seen puts the .382 Fibonacci retracement level right at 1.3804. Just above the 1.3800-level. Again, that happens to sit right at the bottom of the blue-shaded area. Follow the blue-shaded area back in time. You could see some resistance back here, back into late February, and then again on the far left-hand side of the chart, you see resistance into the blue-shaded area.
So, critical decision point is this blue-shaded area just underneath 1.3800. If it holds underneath there, we look for falls back down. Again, that would be in the direction of our Forex Black Book trend bar down here and the direction of the trend has been going in for the past couple of weeks. And an example of that is just a few weeks ago, where we saw the bounce higher, challenge the green zone, and then made a new low. So that’s the example we’re going to go on. We’ve seen lower highs over the past few weeks. That’s what we’re going to be looking at.
Take it down to the 4-Hour Chart. Again, there is our current downward trend we’ve seen from the highest high on the 4-Hour Chart down to the current low. We’ve seen a rally higher before, and then a return in the downtrend. So, as long as it stays within or below this blue-shaded area today, I would suspect that we’re looking at resistance and the possibility of turning back down in the direction of our current trend or current momentum that we’ve seen and in the direction of the Forex Black Book trend bias.
What we’d be looking for, for the Forex Black Book signal would be a new red or yellow downward-facing arrow. Here you could see we got some yellow arrows here, before the move, as it went back down. The problem with those yellow arrows at that point is that the trend bar was green, but we did see it begin falling back down. So, if you’re looking at a red trend bar and you see the yellow or red arrows like you see at the very top of the chart, then you’d be looking for some downward pressure for the EURUSD once again, likely challenging under the yellow zone and pressuring lower.
Also, yesterday’s bank flow levels came out a little bit late after the Trade Room, but we do see those bank flow levels sitting right here into the blue-shaded area. As we expected, yesterday’s bank flow sell level was right at 1.3805. That was the bottom level. So, if you would’ve taken a sell into yesterday’s bank flow levels, if you were watching them later on in the day, you would’ve seen about a 30 to 35-pip push lower, back into the yellow-shaded area. So, not a bad move if you were able to capture it when those bank flow levels came out. 1.3800 or so.
Now we’re seeing it right back into the blue zone. I would suspect once again today we’re looking at resistance here, so let’s go ahead and put a couple arrows. As long as it stays within, below the blue-shaded area, and under the bank flow levels today, then we’ll look for resistance and the potential to fall back in the direction of our current trend and current momentum. If the market breaks above this blue-shaded area and pushes above it, of course the next area of resistance would be your green-shaded area. You follow that back in time. You could see historical resistance here and support on the left-hand side. Also, .618 fib sits at 1.3860.
Of course a break above the green zone likely challenging the highest highs once again for the EURUSD. So, blue-shaded area – critical decision point. Within it or under it, we go back down. Above it, we begin looking for the market to go back up. Of course our current support for the EURUSD today is the yellow-shaded area. We’ve already seen it challenge here once. Could not break through 1.3740. Had a very difficult time getting through the 1.3740-level, and then pushed back up here into the upper-1.3700s. So, if we’re going to see some more bearish pressure, what do we need to see? We need to see a breakdown of that yellow zone, a breakdown of 1.3740, and a continuation down towards 1.3700.
So, two things we’re going to look for today. Well, three things really. Resistance into the blue-shaded area to continue. We’re going to watch for today’s bank flow levels likely to be very similar to yesterday’s or over the past week and a half or so. Right above the blue-shaded area, implying resistance there. And we’ll also be watching for a red arrow or a downward-facing arrow with Forex Black Book. Those three things could give us opportunities to trade in the direction of the trend and the momentum, which is for the sell side right now. The only thing that would change that, of course I think, would be a break above the green zone. Then we’re likely looking for the challenge of the highest highs for the EURUSD once again.
