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I’m going to begin the day today on the US Dollar versus the Canadian Dollar [USDCAD]. Starting on the Daily Chart, we could see that this currency pair has been in an uptrend for a long time. We have been studying this in the trade room for many month. We go all the way back to the left-hand side of the chart. Back into September of 2012, we began this uptrend.
Throughout the life uptrend, we’ve seen many ups and downs and periods of congestion or consolidation, ranging, but continuing to pressure in the direction of the trend. And not so different at the top right-hand side of the chart. We’ve gone into a bit of a contraction period, where we see lower highs and higher lows at the top of the chart, and I’ve delineated that with trend lines to represent somewhat of a triangle pattern at the top right-hand side of the chart.
Let’s go ahead and zoom in a little bit here on the Daily, and you could see the lower highs and higher lows that have been containing the USDCAD for the past several weeks. We go all the way back here into the end of January. We made our highest high into the 1.1200s. We see a new lower high here into the end of February. And of course, most recently, just yesterday we made a new high into the green-shaded area into the top of the triangle pattern.
Yesterday’s analysis in the Trade Room. We talked about selling into the green-shaded area at top of the triangle pattern. So, if you did that, if you followed along with my suggestion and sold it up here towards the green-shaded area, then you’ve now seen the market fall from about the mid-1.1100s, back down here into the mid-1.1050s or so. About a 75 or 85-pip drop from the green zone, down to this yellow-shaded area.
Now, of course, if it breaks underneath this yellow-shaded area, the current support that we’re seeing right now. We could see it even back down towards the bottom of our triangle pattern, back down towards the 1.0980s for the USDCAD. Let’s go ahead and zoom in one more time here on the Daily Chart. And again, there’s our green-shaded area that we discussed yesterday in the Trade Room. Here’s our yellow-shaded area holding as our support. Here’s our purple-shaded area as the next support.
Now, it doesn’t have to break down through the yellow-shaded area. It could indeed find support here and start working its way back higher. So, anybody that’s still in sells from the green zone should be protecting profit as it sits into this support in the yellow-shaded area. We’re in a bit of an area of congestion or contraction here for this currency pair between the green-shaded area and the yellow-shaded area. If you could see over the past several weeks, I’m going to go ahead and put my cursor over here right on – well, we’ll put it on this candle here. Back on February 20. February 20th we went into this period between the orange and the yellow-shaded area right here, between the mid to low-1.1100s and the mid-1.1000s.
We could see it held within there. It’s been holding within there. With the exception of this one dip down here into the 0.900, for the most part, we’ve been holding in this period of congestion. So we really need to see a breakout on this currency pair. A breakout of this period of congestion if we’re going to see a nice trending run for this pair. Under the yellow zone, a run back down to the purple zone becomes a possibility. Holding here in the yellow zone, we’re back to the green zone and a possibility of a return of the longer-term uptrend.
Remember the trend is up. However, looking down at the bottom of the chart, the Forex Black Book signals bearish price action, and so we could see that over the past several weeks, we have seen lower highs signifying some potential bearish action. A breakdown of the yellow zone, we target the purple zone. A break there continues the bearish trend.
This could change. We’ve seen, throughout the life of the uptrend, many times where the Forex Black Book trend bar went red and then it turned and went in the direction of the trend and turned green again. So, don’t get too confused by the red trend bar. Yes, when it rallies into resistance, it becomes selling opportunities, but don’t forget about the overall longer-term trend. At any point it could find support. So, selling into resistance is still a possibility, but protect that profit as it challenges into support.
Let’s go ahead and take that information down to the 4-Hour Chart. And of course as we get down here to the 4-Hour Chart, we’ll be able to see more detail about what the trend has been doing. The green-shaded area yesterday, as we discussed, was our resistance and possibility of selling. We also, during the Trade Room, the bank flow levels popped up and we could see a confirmation of resistance. Any selling into the bank flow levels yesterday, let’s go ahead and put my cursor right on yesterday’s bank flow level. 1.1145, 1.1144 or so. A sell from the 1.1145-level, again, has seen about 75 or 85 pips on that fall back down here to the yellow zone.
So, profit made on the bank flow sells or even just a sell into the green-shaded area yesterday for the USDCAD. And again, it gave you an opportunity to lock in. If you locked in, break even. It settled out here in the orange zone for a period of time, but then continued to pressure lower. Let’s go ahead and bring these arrows down here. Today this is support. The yellow-shaded area. A breakdown of the yellow-shaded area, we look for the continuation of the downward move. If you were in a sell, protect profits. Cheer on the sellers to breakdown through the 1.1050-level, and target back down here to the purple zone.
Now, if you’re on the other side of the market and you’re looking to trade in the direction of the overall longer-term trend, this yellow-shaded area becomes a potential support and a buying opportunity for you if you were looking to buy this currency pair. Obviously we’re holding as support here over the past several hours. We have seen great deal of support back in the past. So, if you’re not holding sells from the green zone, a potential buy opportunity here into the 1.1050s and 1.1060s is a possibility, targeting back to the top of the green zone once again in the direction of the trend. Your risk in any buys here in the yellow zone is that we continue to break down through 1.1050 and targets back down towards the 1.0900s once again for the USDCAD today.
