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I’m going to begin the day today on the Euro versus the US Dollar [EURUSD]. Let’s go ahead and get started here on the Weekly Chart. Get a longer-term perspective. Let’s take a look. It’s going to be a little bit difficult to see on this vantage point, this viewpoint that we’re looking at here on the Weekly Chart, but I think you’ll get the understanding right about where the current market price is.
If you look to the right-hand side of the chart, the longer blue candle that you see here on the right. I’m circling it with my crosshair. There’s a yellow-shaded area. Yellow-shaded area between right around the 1.2760 and 1.2800-level. If you follow that yellow-shaded area back in time, you go back here to the left-hand side of the chart. You take a look at this red box that’s over here on the left-hand side of the chart. Look at the support that you see back on the left. We’re looking back into 2013. Several times in 2013 finding support there.
You go back a little bit further into 2012. You see a little congestion and support found back in 2012, so historically this yellow-shaded area, just underneath the 1.2800-level, has been support for the EURUSD. That being said, historical support becomes resistance. We talk about that in the Trade Room quite often; how historical support becomes resistance for the market. So, you take that into consideration and then you look back over here to the right-hand side of the chart and you could see that historical support has now held as resistance over here so far for the past couple of weeks. Last week and now this week. Remember this is the Weekly Chart, so the two candles that are challenging this yellow-shaded area are weekly candles.
So far, for the past two weeks, it has held. Yes, the current weekly candle spiked up to the green zone, but so far it’s come right back down underneath that yellow-shaded area. So, historical support is now helping us identify this area as resistance underneath the 1.2800-level. If it stays underneath there, if that continues to hold, we could be looking for a turn back down in the direction of the overall longer-term trend, which has been bearish for the past several months. We go all the way back from the highest high on the chart.
One other thing that I want to show you, and I’m going to actually take one of the fibs that’s on this chart off if I can get it selected here. And the fib that we do see here on the chart – I’m going to scroll it back just a little bit – comes from the lowest low, bottom left-hand side of the chart, to the highest high. Here’s what’s important about that fib. From the low to the high, the .618 Fibonacci retracement level was at 1.2787. Why is that important? Because it matches with that historical support. 1.2787. Historical support. Fibonacci.
So, now that we’re under that .618, under the .618 of this uptrend, under those supports, that again becomes resistance for the day and this week for the EURUSD. So, very interesting stuff happening there into that yellow-shaded area. Let’s take that information down to the Daily Chart, and there’s that yellow zone. Yeah, yesterday we saw a spike right there into the green zone. It’s come right back into that yellow and under that yellow-shaded area. We know it’s historical support and resistance. We now see it holding there. There’s the .618 fib there into the 1.2787-level. Clearly there is resistance there and the market is having a hard time breaking through that barrier.
All right, so let’s take a look and talk about charting patterns. If you’re familiar with candlestick patterns and charting patterns, just a little bit of technical analysis right now. If you look at the red trend line, yes, it’s made a little bit of a hop higher. And if I put another trend line right about right here. Let’s put one right about right here. We’ll actually move that one just a little bit. Try and make it about as even as possible, as we can with that other one, so parallel with the other one. If we take a look at that, we can start to maybe understand this timeframe that we’re in right now as a bearish flag.
Why is it a bearish flag? Because we would expect the market to break to the bottom side in the direction of the previous trend. The previous trend move was right here. It was going down. Then it’s gone into a little bit of a flag pattern. And if it breaks underneath the pink-shaded area and underneath that flag pattern, we would expect it to go lower. Now, it’s got a long ways to go before it’ll get there. That would be underneath the 1.2700-level, but again, we have an expectation here. If it breaks out to the bottom side of the flag pattern, then we look for it to continue the previous downtrend that we see here for the EURUSD.
So, all that’s information that tells us that there’s likely going to be resistance up here towards the top of that pattern, close to 1.2800 as possible, maybe even into the 1.2850s, where the green-shaded area is. And you would expect to be selling here. The only reason to change that expectation, again, would be a breakout above the resistance, so we’d likely look for the break above 1.2890, 1.2900 for a continuation higher.
Let’s take one more fib. I’m going to scoot this over just a little bit like this. Let’s take Fibonacci from the highest high all the way at the topside of the red trend line, down to the lowest low. And in doing that, we find the .236 fib right at 1.2855, right about the bottom of that green-shaded area. So, this zone between 1.2800, where the .618 of the previous uptrend, and the .236 of the current downtrend sits is our current resistance for the day today, kind of between that yellow and that green-shaded area down there. So, that’s resistance.
So, what do you do with this? I don’t think you want to buy it right now. I think it’s more likely you’re looking to sell this, targeting the pink-shaded area, 1.2700 or even into the 1.2660s, as it goes down into that support. If it breaks to the top side, that’s the risk on this scenario. Let’s take all that information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, we see a little bit more confirmation of resistance here. We see yesterday challenging into the green zone. Guess what. Yesterday we saw bank flow levels pop up during the Trade Room right there into the green-shaded area, showing us current resistance into that level.
So, again, up here towards the green zone, maybe even a little bit lower here into the yellow zone I would believe would be a pretty decent selling opportunity for the EURUSD for a continuation of the previous downtrend. If you’re looking for a buy, I don’t think you want to buy it all the way up here into the yellow and green zone. I think the better opportunity to buy it would likely be all the way back down here into the pink-shaded area, knowing your risk is that it breaks under that pink zone and continues to go down in the direction of the downtrend.
So, buyers likely being very cautious right now, waiting for it to go down to the pink zone, bottom of our little flag pattern that we see here. If you’re selling, you’re selling here into the yellow and the green-shaded area. You know you have a known risk, which is probably right above that green-shaded area. Remember buy low, sell high. You want to sell at the highest point within the pattern. So, that’s what you’re looking for up there towards the 1.2800-level. As close as possible I think will give us our best risk-reward here for any sells that you might decide to take here today. You’re targeting the pink zone or lower. If it breaks out of that flag, we could be looking for it to go lower. If it doesn’t, you want to protect the profit on the way down.
If you’re already in a sell from the green zone, you’re probably protecting profit now. So, I think selling into the yellow, into the green zone will be an opportunity for the day today. Break of the green zone, you get out of those sells because it’s going back up to the blue zone or higher. Pink zone would become your target for support. If you’re looking for a buy, the green trend bar, Forex Black Book is up and it’s been going up for a few days. If you’re looking for a buy, the best opportunity to do that would be the pink-shaded area for the EURUSD today.
