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We’re going to begin the day today on the Euro versus the US Dollar [EURUSD]. Starting here on the Daily Chart, we look to the left-hand side. We can see that this currency pair was in a long-term uptrend. We started all the way back in June of 2013, bottom left-hand side of the chart, and began the climb that pushed all the way here into 2014.
Throughout the life of that trend, we see many highs and lows being made, but the predominant bias to the trending or price action was to the upside. We could see that in a couple of different ways. Of course higher highs and higher lows helps us define the price action of an uptrend. We have a trend line there recognizing the higher lows within the trend. We also, on this chart, have a 100-day moving average, and for the most part, through the life of that uptrend, the market stayed above that 100-day moving average, only a couple of times peeking underneath it.
Well, in most recent days, we’ve seen a little bit of a change in that trending behavior. And if I scoot the chart over a little bit, we could see recently we’ve seen the push underneath not only the blue trend line, but underneath the 100-day moving average. And it’s my expectation that as long as we stay underneath it, then we’ll want to look for a sell bias. We’ll want to have a little bit of a sell bend to our trade. That way, if it does continue to move down, as it was moving up on the left-hand side of the chart, then we look for opportunities to trade in the direction of that trend bias.
We could see the moving average up there above the current market has a little bit of a downward slope to it starting to shape up, so it gives us a little bit of a sell bias. If that’s the case, then if we’re in a sell bias mode, then we’re looking for selling into resistance or breaks of support. That’s really the way it always works out to find the lowest risk, highest reward opportunity. Selling into resistance or a break of support. So, as we look at it here on the Daily Chart, let’s go ahead and zoom in a little bit as we look at it here.
We could see, today included, eight or nine days. We could see the market. Just congestion between the orange and the purple-shaded area that we see here on the chart and no real trending breakout. No upward movement. No downward movement. Just bouncing around between the orange and the purple-shaded area. Purple-shaded area is 1.3618 to 1.3635. The orange-shaded area: 1.3595 down to 1.3575. So, those are the boundaries right now for the area of congestion for the EURUSD.
If we see it break above the purple zone, the blue-shaded area becomes another boundary of resistance. If we break underneath the orange zone, we have a little bit of a deeper fall, all the way down to the pink-shaded area as our next support down into the low-1.3500s. But really what we’re looking for is a break out of this period of congestion here for the EURUSD today. And again, since we’re underneath the 100-day moving average, I have a little bit of a sell bend to my trade. A little bit of a sell bias, looking for selling on rallies to resistance.
So, if that’s the case, we’re looking for a couple of different things. Of course the purple-shaded area becomes an opportunity, looking for a turn back down to the orange-shaded area. A break underneath support, of course we look for the continuation lower. Those would be the closest areas to look for if you’re looking to sell. Hit the purple zone or break underneath the orange zone. Then we look for it to target, at least, back down here to the pink-shaded area for the EURUSD.
Now, it doesn’t have to do that. If we see a little bit of a bump higher, if we get above the purple-shaded area, about 1.3635, we know that the blue-shaded area historically has seen some resistance here and that becomes our next area that we’ll look for resistance for the EURUSD today. Taking Fibonacci from the highest high, down to the current low that we see here on this viewpoint of the Daily Chart actually puts the .382 Fibonacci retracement level at 1.3693, which is exactly at the top of the blue-shaded area and where our last resistance high is.
So, we could see the 1.3693-level. That’s the .382 of this downtrend; sits at the top of the blue zone. So, that’s really our last hope for resistance, I think. If it breaks above that blue zone, it’s likely going to turn back up, challenge the moving average, and maybe even turn back into an uptrend here for the EURUSD. So, that’s our last hope for resistance. Looking for sells in the direction of the current trend bias, which is for the sell side. A breakout of this congestion of course would be beneficial for the EURUSD.
Let’s go ahead and take all of that information down to the 4-Hour Chart. As we get down here, there’s our purple zone. There’s our orange zone. Those really don’t change even as we get down here to the smaller compression. We just get a little bit more detail. Over the past few hours, we’ve seen a little bit of a bump down here to the orange zone, so that’s not too hard to see as our intraday support here into the orange zone. Of course we already know that the purple-shaded area is our intraday resistance. The break above 1.3635, we know the blue zone is resistance.
We didn’t get new bank flow levels yesterday, but the previous days – Thursday and Friday of last week – we see the bank flow levels sitting right here into the blue-shaded area, just underneath the blue-shaded area. I would suspect when we do get new bank flow levels this week, they’ll be very similar to what we saw at the end of last week. So, again, that gives me a little bit of a sell bend to my trade because, if I zoom out a little bit here on the 4-Hour Chart, you can see we don’t have any buy levels. We only have bank flow sell levels, which tells me that there are sell orders just above the current market waiting to jump in and pressure this back down, or at least they’re protecting the market from going higher. They’re protecting resistance at this point.
So, at this stage, I’m looking for sells. We’re looking for the bank flow levels to help us identify resistance, the shaded zones that we’ve already identified as resistance. Fibonacci to help us identify resistance, and looking for a turn back down in the direction of our trend bias, which, at this point, I think we definitely need a break underneath the orange zone if we’re going to see the continuation lower. And all of that changes, again, if we break above the blue-shaded area, above the last resistance high. I think all of that changes and we’re turning back into an uptrend for the EURUSD this week.
