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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 could see, for a long time, we have been in an uptrend. We go all the way back, on this chart, to May of 2013, where we could see the lows down there into the 1.2800s. And recently, we’ve seen a climb and spike all the way up into the 1.3900-level.
In recent weeks though, we’ve seen a little bit of a pullback, where the market has fallen from that spike high around the 1.3900-level all the way back down here into the 1.3400s. So, we’ve seen a little bit of a downward fall or retracement of this previous uptrend. The question of course is: are we going to see a continuation of this bearish move or are we eventually going to turn back up in the direction of this uptrend?
And I think we’re at a key decision point for that, and we’re testing our most recent resistance high. This high right here in the middle of this blue-shaded area. In fact, let me go ahead and put a little black X right there so you know exactly where I’m talking about. Right there where that black X is you see that last high. Let’s go ahead and zoom in also. Allow us to see that a little bit better. Right there where that last high is.
As long as we stay underneath this last high, there’s potential for us to turn back around, challenge the lows, and continue the downtrend, because remember the definition of a downtrend is lower highs and lower lows. So, as long as we stay underneath this high, there’s potential to return in the direction of this bearish move. However, if we break above this last high, break above this blue-shaded area, and make a new higher high, that begins our defining point for the return of the uptrend with higher highs and higher lows. So this is a critical decision point for the trend.
Staying underneath here, we potentially go back down in the direction of the bearish move. Breaking above here, we look for a continuation higher. I’ve also gotten a few Fibonacci levels drawn on this chart that give us an idea of where resistance will be. In fact, let me go ahead and take this one off real quick. This shorter uptrend. But taking that off, we can see Fibonacci from the highest high on the chart, down to the current low, just of this downtrend, puts the 50% retracement level right here in the middle of the blue-shaded area.
Again, that gives us an idea of resistance there. And as long as it holds underneath it, there’s potential for a reversal to go back down. A break above that 50% retracement level, of course we’d look for the continuation to the next level, which would be the .618, and that happens to sit right here in the middle of this pink-shaded area just above the current market and the blue-shaded area. And of course a break through there, likely pushing and challenging the highest highs, the yellow-shaded area at the very top of the chart into the 1.3800-level once again.
So that’s the Fibonacci of the longer range. The shorter range, actually from where the black X is down to the lowest low, actually see the .786 Fibonacci retracement level right here, again, in the middle of that blue-shaded area. Actually, the .786 fib of this downtrend matches exactly with the 50% of this longer downtrend, right in the middle of that blue-shaded area. So, critical decision point.
Follow the blue-shaded area back. Of course we have our most recent resistance high here, where the black X is, but we follow it a little bit further back. We could see back here into early January. Mid to early January, we could see some resistance here. We go all the way back here into December. We could see some support into that same blue-shaded area, and then we go all the way back here into October of last year and we could see some resistance. So, resistance, support, resistance, resistance. We could see that this is a critical decision point.
Staying within or under this blue-shaded area today, potential reversal to go back down in the direction of this downward move that we’ve seen over the past several days. Breaking above here, we begin the next phase of the uptrend, challenging the highest highs all the way up here towards the 1.3800-level for the EURUSD.
Let’s go ahead and put a couple of arrows there to give us our ideas of what we’re looking for. Above the blue zone, that Fibonacci, we go higher into the pink zone at least. If not, all the way to the yellow zone. Below the blue zone today, we look for resistance, a turn back down towards the green, the purple, and possibly the yellow-shaded area at the bottom of the chart. And of course a breakout underneath there, we look for a continuation of the downward trending move that we’ve seen for the past several weeks.
Now let’s go ahead and take this information down to the 4-Hour Chart. And as we get down here, we can see how congested and how much resistance we’ve seen into this blue-shaded area. Not only back here on the left-hand side of the chart. Going back, again, into January, we see that resistance into the blue zone, but just a few days ago we could see resistance here falling back down to the purple zone. And here we are, once again, today, challenging here. A few days ago we saw the bank flow levels capping out right there into that blue-shaded area.
They were a little bit lower yesterday, as the market settled down underneath that green zone. We’ve seen the market come back up nearly 24 hours later. 20 hours later. It’s come back up into the bank flow levels. I would suspect today that when our bank flow levels get targeted or published today, we’ll see them here or just above the blue-shaded area, between the blue-shaded area and the pink-shaded area, unless we see a massive move on news later on today. That’s where I would expect we’ll see resistance, between the blue and the pink-shaded area today for the EURUSD.
The Forex Black Book trend bar is red. It is dark red, showing there’s some disagreement between the shorter and longer-term trends, but it is red, which leads us to believe we could be looking for a return of the downtrend. Now, over time, if we break through the blue and the pink-shaded area and continue challenging back towards 1.3800, we’ll likely see this trend bar turn back to a green color as we look for the return of the uptrend. But for the time being, as long as it’s red and we’re challenging resistance, there’s potential for this to return back down in the direction of the downtrend that we’ve seen over the past few weeks.
So let’s go ahead and line this up. Our expectations today. The blue and the pink-shaded area clearly historical resistance going back here where this black X is here in the middle of the chart. So we’re clearly seeing resistance here. As long as we hold within or under the blue zone, which we have so far today, we’re likely looking for a turn back down towards the green-shaded area as support or the purple-shaded area as our next support. Those are two support levels.
If we break above this blue-shaded area and the 1.3695-level, we’re likely taking a turn back to the pink-shaded area as our next resistance high. And of course a break above that pink-shaded area, we’ll likely turn back all the way up to the highest highs, into the yellow-shaded area. So, if you’re looking for low risk, high reward opportunities for selling on the EURUSD, your selling opportunities come here in the blue and the pink-shaded area. Those become intraday opportunities to sell.
If you’re looking for a buy, as long as we hold underneath that blue-shaded area, I would be discouraged from buying because we’re running into resistance. We’re holding underneath resistance. What you’re looking for, if you’re looking to buy this currency pair, would be a breakout. An open and close above the blue zone gives you confidence it’s going to continue to pressure higher. So, you’re looking for the breakout above the blue zone to give you confidence to buy this. If you’re looking for a sell, you’re looking for it to hold in the blue zone to go back down using appropriate risk strategies.
Now, another reason or opportunity to buy this may be a dip back down to the green zone. That becomes an opportunity to buy it also into support. So, two opportunities to buy it. Dip to the green zone into support, buy, targeting the blue zone or higher. Break of the blue zone, buy, targeting the pink zone or the yellow zone. If you’re, again, looking to sell it, your hope is that the sellers can hold it underneath the blue zone, maximum the pink zone, and we look for it to begin working its way back down in the direction of the trend that we’ve seen over the past several weeks, going back to December for the EURUSD today.
