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I’m going to begin the day today on the US Dollar versus the Canadian Dollar [USDCAD]. Starting here, on the Daily Chart, I’ve zoomed quite a bit out so we could see the longer-term trend. This blue trend line at the bottom representing the longer-term trend going all the way back into September of 2012. We’ve seen the market rising ever since it started establishing these higher highs and higher lows.
Over the past couple of weeks, we’ve challenged the bottom of that blue trend line and bounced off of it, and had a pretty decent retracement back higher again. Let’s go ahead and zoom in so we could see some more detail into this chart. And of course, here is that bounce on the blue trend line down here into the 1.0180s. We saw, over the past couple of weeks, the market held within a period of consolidation between this pink-shaded area here into the 1.0300 down into the 1.0280s, and then we saw resistance here into this green-shaded area between 1.0355 and 1.0340.
Over the past few days though, we’ve seen a breakout of that consolidation. In the Trade Room for the past couple weeks, I’ve been focusing in on the buy side, looking for buys on supports into the pink-shaded area. If you also followed into that methodology, you’ve now seen a breakout above the resistance highs and a push all the way back up here into the 1.0400s. Currently finding resistance into 1.0414 area or so, just underneath the 1.0420-level. This blue-shaded area that sits up here towards the top of the chart.
Taking Fibonacci of the last down trend range, from the highest high of that range down to the lowest low, puts the .618 fib right at 1.0419. That’s the bottom of that blue-shaded area. So, currently, to boil all that down, we have resistance into the blue-shaded area just above the 1.0420-level and the .618 fib. Our current support would be the same green-shaded area, where, over the past couple of weeks, we’ve found resistance in this period of consolidation between the 1.0340-level and 1.0360.
So, for the day today, as long as we hold above that green-shaded area, there’s potential for support and rallies back to the blue-shaded area. And the blue-shaded area, as long as we hold underneath it, there’s potential for resistance and falls back down into the green-shaded area. Now, either side, there could be a breakout. If we get underneath this short-term red, bullish trend line that we see here and underneath that green-shaded area, we’ll likely look for a turn back down in the direction of this previous down trend and a new low to be established. If we stay above the green zone, challenge the blue zone and getting above that blue-shaded area and the 1.0440-level, likely looking for a turn back towards the highs and this yellow-shaded area that sits up here, closer towards the 1.0500-level and the 1.0480-level.
That 1.0480-level also sits where the .786 fib of that same previous down trend sits. Right there at the bottom of that yellow-shaded area. I’ve also connected the last two major highs here on the USDCAD with a bearish trend line. And we could see those last two highs connected with that trend line. That would also come right there into that yellow-shaded area at the top of the chart into the upper-1.0400s, towards 1.0500.
So, again, a breakout above the blue zone, we challenge the yellow zone and the bearish red trend line. A breakout under the bullish red trend line and the green-shaded area likely looking for a turn back in the direction of this down trend. Take that information down to the 4-Hour Chart so we can get a little bit more tighter information about this and a little bit of a tighter view.
Yesterday we saw the market holding into the here, into this blue-shaded area. Really hasn’t done a lot since holding into that resistance. We’ve gone into a period of indecision, a holding pattern for this currency pair, and of course today we do have Canadian employment data being released, so that could be the catalyst that drives it outside of this consolidation that we’re seeing right now for the USDCAD.
Again, if that Canadian employment data comes out and we see that cause a rally for this currency pair, a breakout above this blue-shaded area is what we’d be looking for. So, I’m going to go ahead and bring these arrows in a little bit tighter. Underneath the blue zone, of course resistance right now. Potential to challenge back to the green zone, where our current support is. And by the way, down here into that green-shaded area and the bullish red trend line is where yesterday’s bank flow levels are.
And of course, above this blue-shaded area we look for a rally back to the yellow zone, and that’s the next – a couple of things up there, into that yellow-shaded area. Of course we have that .786 fib. Of course the .618 sits here in the blue zone. .786 fib sits at 1.0480. That’s of this previous down trend leg. We also follow that yellow-shaded area backwards in time; we could see some historical support over here on the left-hand side, after making the highest high, created several times, finding support into that yellow zone. So, we expect resistance as it reaches that yellow-shaded area – the .786 fib.
So it’s going to take a pretty strong move to get it above 1.0400 and a push all the way up here towards 1.0500. And that catalyst could be Canadian employment data. And then, of course, on the other side, the green zone holding our support. That’s been the trending direction that we’ve seen over the past few days. As long as it holds above that green zone, there’s potential for support and those rallies back to the blue or the yellow-shaded area. All that will be invalidated and change the trending direction if it breaks underneath that red trend line, underneath that green-shaded area, and shatters through where yesterday’s bank flow levels are.
I don’t expect we’ll see today’s bank flow levels come in until closer towards the 10AM Eastern timeframe, so it won’t be there during the Canadian employment data release at 8:30 Eastern timeframe. But again, I think that if we get underneath this green zone, it’s likely to see those bank flow levels drop way down here closer towards the longer-term daily blue trend line that we see down here at the bottom of the chart, down here towards the pink and the yellow-shaded area at the bottom of the chart and where our last historical support lows are.
And of course, likely, if we break through this green-shaded area, this same area that we saw support over the past couple of weeks will be support, and a break underneath that and the longer-term daily trend line. If we get all the way down here into the 1.0250s or so and it breaks underneath there, likely looking for a continuation of the previous down trend and a complete change of the overall daily trend that we began with. And that’s going to take a pretty strong move, so we’ll have to watch to see how that Canadian employment data affects the current market.
Either way, you’re trading this. Whether you’re buying into the green zone or the pink zone, or looking to sell into the blue or the yellow-shaded area, appropriate risk measurements should be taken place. Risk measures should be used. Stops above those levels if you’re selling as resistance into the blue or yellow-shaded area. Stops above them, because if it breaks above them, you expect the market to go higher. If you’re buying into the pink or the green-shaded area, you’re placing your stops just underneath those levels to get taken out with a smaller loss in case the market continues to pressure lower. Appropriate risk strategies should be used in any scenario. Regular market scenarios or during news times, you should be using appropriate risk strategies in either case for the USDCAD today.
