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I’m going to get started today on the Euro versus the US Dollar [EURUSD]. I’m going to start the beginning of the week here on the Weekly Chart, so we can get a longer-term perspective for this currency pair, and then we’ll go down to the smaller compressions. The first thing I want to point out here on the Weekly are the two fib ranges that I have drawn on the chart. From the lowest low, black X down here at the bottom of the chart, to the current high, which sits up here into the 1.4000-level and the low here in the middle of that trend. The middle black X here at the bottom of the blue trend line to that same highest high.
In doing that, we find a couple of different fibs settled out right here in this yellow-shaded area. The yellow-shaded area right in the middle of the chart. It’s the .382 fib of this longer-term trend and the .618 fib of the shorter-term leg of the trend all sit right there into the yellow-shaded area. So, we know that there is potential support identified by Fibonacci right there into the yellow-shaded area. The next area with those two ranges that we see Fibonacci coming into play is down here into the blue-shaded area, down closer towards the 1.3000-level.
So, very interesting there. Here into the 1.3200s and then back to 1.3000 are where we see our fibs from these last two legs of the trend. And beyond there we’re going all the way back down into the 1.2700-level. So, quite a long ways down are our Fibonacci targets if the market continues to pressure in the direction that it’s been going in for the past several weeks.
All right, now that we’ve seen that, let’s take that information down to the Daily Chart, and there again are those Fibonacci levels that I’ve pointed out there. The .382 and .618 just a little bit above the current market price. Of course we did get a little bit of a gap lower over the weekend, but we see those two fibs just above the current market price. One more fib here on the Daily Chart that I want to point out is I took Fibonacci from that low right there in the pink-shaded area, where the black X is, back to that same highest high. In doing that the 1.618 Fibonacci extension level sits at 1.3208, and that’s right at the bottom of that yellow zone.
So, now we see three clues to support here in this yellow-shaded area. Now, over the past three days, going back Friday, Thursday and Wednesday, we saw support above. Right now we’re challenging the bottom with that gap. The question, the clear question for the day is: what do we do with this? I mean do we continue to sell it even though we’ve gapped lower? We’re challenging into these support levels, into these Fibonacci levels. Well, I don’t think so. I think the best opportunity to sell this currency pair right now would actually be after a little retracement higher.
We looked at this last week. This previous timeframe back up here at the top left, into the blue trend line, where it made a little bit of a bounce from the pink zone, a little bit of a hop higher, came just shy of the 100-day moving average, and then the next leg of the downtrend began. I think something very similar to that would give us a lot better opportunity to trade the EURUSD. A little bit of a retracement higher, a little bit better price for our selling dollars there as it takes that push higher. So, I would actually prefer to see a retracement higher first before I would sell it.
Selling into support is, in my expectation, not usually the best idea because it doesn’t provide a low risk, high reward opportunity. Right now what’s the risk on any trades that you would take for selling. Well, I think at least, at minimum, you’re going above Friday’s high, which is all the way up here into 1.3295, so you’re going closer to the 1.3300-level for a stop loss, so you’re looking at an overall 100-pip stop loss if you were to take a sell right now. Wouldn’t it be much better if we waited for at least a rally back into the mid to upper-1.3200s, or maybe even a little bit higher as it goes back up to challenge the red trend line and these last supports in the green-shaded area into the mid to low-1.3300s.
So, for the day today, that will remain my focus. If I’m going to sell it, I want it to go back at least to the top of the yellow-shaded area, if not back to the green zone and the red trend line. I’m not selling it right now. Well, if that’s the case, if I’d prefer a retracement higher before I sell it, does that mean there’s a potential here to buy it? And I do think so. I think there’s a clear opportunity today to look for that retracement. It provides a fairly minimal risk opportunity for a buy here into the upper-1.3100s, 1.3190s. We see the gap from the weekend. Of course typically you would expect the market might try to pullback and fill that gap in, even coming back into the top fib ranges that we talked about on the Weekly Chart.
So, Forex Black Book trend bar is red. It’s still pointing bearish. I still have a bearish trend bias here, but I think for the intraday today there’s a good chance that we see some pullback for this currency pair as we have now challenged into the deepest support we’ve seen for quite some time. Underneath there, if we squeeze it in just a little bit, the next support would be seen here in the purple-shaded area. That’s not where our next fibs are that we studied a few moments ago, but that would be of course where our next support would be, closer down into the low 1.3100s, towards the 1.3100 at the bottom of that purple zone. That’s the next support.
So, let’s already go ahead and put one arrow here. I’m looking for around the 1.3200 to hold as support today, and then for us to see a rally at least back to the top of the yellow zone before we begin thinking about a new selling opportunity for the EURUSD today. If it breaks down without making that retracement higher, breaks down and stays underneath by the end of day today, underneath 1.3200 we may just see that continue to pressure lower here for the EURUSD.
Take it down to the 4-Hour Chart here. In getting down here to the 4-Hour Chart, take a look at this. Wednesday, Thursday and Friday we see bank flow levels hovering right around the 1.3200-level. We haven’t seen a real strong reaction off of those bank flow levels, but here we see bank flow buy levels from Friday sitting right into the upper-1.3100s, again, giving me a high probability and a high confidence in a buy scenario for the intraday down here. Now, if today’s bank flow levels also come out in the same, similar area, then of course that gives us a boost of confidence about looking for a little bit of a retracement back up again.
Again, no guarantee there, but definitely something to think about with the bank flow levels there. The sell levels were way up here in the green-shaded are on Friday, so these are Friday levels. Not today’s levels, but if we’re going to see an opportunity to sell this, I would prefer it to go back up, minimal to the top of the yellow zone, if not potentially even back to the green-shaded area. Today it does hold some opportunity for an intraday buy and looking for those rallies higher for the EURUSD.
