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I’m going to get started today on the US Dollar versus the Canadian Dollar [USDCAD]. I’m starting all the way out here on the Weekly Chart, give us a longer-term perspective, and then we’ll go down to the smaller compressions and get some more detail for the day today for the USDCAD.
Here on the Weekly Chart we could see it’s been in an uptrend for quite some time. We go all the way back down to the bottom left-hand side of the chart. We’re back into 2011. We started at the lowest low on the chart in 2011, had a little bit of a rise, took a little bit of a dip down, found support where the bottom of the red trend line is, and then began the next phase of a long-term uptrend that pushed all the way from the 2012 timeframe to the beginning of this year, which was 2014. March we found a resistance high right into the mid to low-1.1200s.
Then it took a little bit of a fall back down, challenging back to the red trend line that we see coming from the bottom of the chart, challenging back down to that bullish trend line, and then we saw another run in the direction of the trend, taking it all the way up here into the mid to upper-1.1300s. Now, over the past few days, we’ve seen a little bit of a pullback. It’ll be easier to see on the smaller compressions, but we’ve seen a little bit of a pullback, taking it all the way back down into the mid-1.1100s.
Let’s go ahead and take this information on down to the Daily Chart and, like I said, you could see this a little bit easier on the smaller compressions. There’s that pullback. We saw it challenge all the way up here into the mid to upper-1.1300s. Now we’re all the way back down here into the mid-1.1100s. A little bit of a pullback of the longer-term uptrend, but that’s nothing new. We’ve seen that during the uptrend, where the market has made these pullbacks, these short-term reversals still staying within the parameters of the uptrend. You could see it back down here.
You see the uptrend, retracement, uptrend, retracement, uptrend, retracement, uptrend, and so now we’re in that retracement phase again. The question of course will be: are we going to see a return of the uptrend or are we seeing a continuation lower and maybe a turn into a downtrend for a short period of time? And that’s a possibility because we can see that over here on the left-hand side, where it was in an uptrend. We went into a period of congestion. Then we turned into a downtrend for quite a long period of time, where it pushed all the way from here, back in March, down to the bottom of the chart into July. So, quite a long run down. Then it turned back in the direction of the uptrend.
So, all the while we can be focused on the uptrend, but looking for clues and possibilities that we could be seeing a short-term or longer-term change in the overall trending pattern. The trend pattern is of course higher highs and higher lows, and lower highs and lower lows. Those are the two trend patterns that we would look for here for this currency pair.
Let’s go ahead and zoom it in here on the Daily Chart. You could see I’ve highlighted a couple of areas as support and resistance. Look at this right here. Several-day period finding congestion in the blue-shaded area. We went between – we’ll call it – September 26 and October 13. We went for several weeks here, bouncing around inside the blue zone. A little bit above it. A little bit below it, but for the most part sticking within the blue zone, finally breaking and making the new high.
Well, that’s where we are again. We’re in that same blue-shaded area. Goes between 1.1150 and basically 1.1200, the top of the blue-shaded area. Now, I would say this in the Trade Room quite often, that if you’re looking to sell a currency pair, you want to sell for two reasons. You sell resistance, which at this point would be the top of the blue-shaded area. You sell resistance or a breakout underneath support, which would be the bottom of the blue-shaded area. Those are our two opportunities to sell this.
So, at this point, I don’t really think that this is a good selling opportunity. Yes, it’s going down, but is it a safe selling opportunity? And what we have to be able to do is evaluate what’s our risk on the currency pair. Right now I think your risk is at minimum above 1.1200, above the blue-shaded area and the blue, bearish trend line that you see there. That’s where your risk is. At minimum above that. If not, above the swing high, but at minimum above 1.1200, the top of the blue-shaded area. So, if that’s your risk, wouldn’t it be better to sell as it rallies to resistance and closer to 1.1200, as it approaches to the top of the blue-shaded area, kind of like what it did back over here on the left-hand side of the chart or at least the left-hand side of the high here?
The other reason to sell would be a breakout underneath 1.1150, and I don’t consider this a breakout. Just a challenge underneath it doesn’t consider it a breakout. It would need to open and close clearly underneath there before I would consider that a breakout. So, really don’t have any good sell opportunity right now. It needs to go up or break out to go down. If it goes down, of course we’ll look for targets back down here to the yellow-shaded area, which are into the 1.1000s. We’re looking at 1.1095 or so, down even into 1.1060. The bottom of the yellow zone becomes our target zone. That of course becomes a possible buying opportunity in the direction of the longer-term trend.
I have three different fibs drawn here on the chart. One from the lowest low to the highest high, one from this low right about right here where the black X is to the highest high, and one from this low right here to the highest high. Obviously there’s some subjectivity here. You could probably put this here or this one to this low, but either way you look at it, I think they’re going to be very similar. Bottom of the blue-shaded area, red trend line is the .786 fib of the shorter range, and then you could see some overlaps of fibs here into the yellow-shaded area.
So, sellers, you’re interested in this pair, but you’re interested closer to 1.1200 or underneath 1.1150. Buyers, I think what you’re looking for is a push back down to the yellow-shaded area or you’re looking for a breakout above the blue-shaded area and above the blue trend line. So, those are your buying opportunities. Here and here. Selling opportunities here and here.
Let’s take it on down to the 4-Hour Chart. Give you a little bit of a closer vantage point to this. Let me zoom it out one time, so we could see this a little bit easier. Here is your 1.1200-level. Top of the blue-shaded area. Again, I think selling, your risk is above there to begin with. Pushing underneath here, you look for it to go down a little bit further, down to the yellow-shaded area, and of course above the blue-shaded area, you look for it to go back up.
Where does it go if it goes back up? It goes back to the purple-shaded area. So, this is really the way to look at the USDCAD today. If I’m a seller, I want to sell at 1.1200 or under 1.1150. We haven’t done either of those things yet. If I’m a buyer, I want it to get back above 1.1200, back above the blue trend line or dip all the way down to the yellow-shaded area.
Forex Black Book trend bar is still green. We don’t have a recent green arrow, but if it finally starts to turn, gets back above 1.1200, above the blue zone, above the blue trend line and then gives us a green arrow, it’d be a quality signal as we look for a reversal to go back up in the direction of the longer-term trend for the USDCAD today.
