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I’m going to get started today on the US Dollar versus the Canadian Dollar [USDCAD]. I’m starting from the Weekly Chart today because I want to get a longer-term view of the trend. First off is the red trend line that we see here on the chart. We’re going all the way back into September of 2012. A couple of years ago we started this uptrend. We’ve been moving higher highs and higher lows ever since then, pushing all the way up here into the top of the chart, into the upper-1.1200s.
Now, over the past several weeks, we go back into mid-March where we began a little bit of a retracement of that long-term uptrend. We see it falling from the upper-1.1200s, all the way back down here into the 1.0600s, so a pretty decent retracement of this previous uptrend identified by the red trend line. What’s most interesting about that is that we’ve come down here right into that red trend line and stalled above it as support. Then we can draw that blue trend line in here, connecting from the highest high, the highs within that downtrend, and we’re also coming to contact that blue trend also.
So, let’s go ahead and zoom this information down to the Daily Chart. Get closer into this viewpoint. And there’s the red trend line coming up from the bottom of the chart. You could see that longer-term weekly trend line, and of course here’s the blue trend line coming down from the top. For the past several days, we’re going back – let’s count them out – ten days or so. We’ve been stuck between this pink area as support, yellow-shaded area as resistance, but most importantly, just kind of walking right down this blue trend line for the past eight days or so. Now we’re seeing the market try to push above that trend line.
The question is of course: will it have enough motivation to break through this trend line, break through the resistance, and continue to pressure higher? If it does not, we could see it turn right back down in the direction of this previous trend. So, we can see the attempt to breakout of the trend line, but the most important part about this is that over the past several days, I have been stating the fact that as long as it stayed above the pink zone, you would likely be buying on top of the pink zone, targeting the yellow zone. So, if you’ve been following along with that recommendation over the past few days in the Trade Room, then you are now seeing profit. Buys from the pink zone into the 1.0720s. We’re seeing the market now approaching those 1.0770 levels, so 50 pips sittings into the market right now as it approaches the 1.0770-level.
A break through the yellow-shaded area, which is highlighted because there are several fibs in that area. You take Fibonacci from three different trend ranges. The high here where the first black X is, the high here where the second black X is, and the highest high on the chart where the trend line begins. Taking Fibonacci from those three points, down to the lowest low, we see an overlap of several Fibonacci levels right here between 1.0770 and 1.0790. That’s the yellow-shaded area. A push through there, of course let me get one more black arrow. A push through this yellow zone and the blue trend line, our next resistance target would be of course the blue-shaded area. There’s some Fibonacci there, and of course these last historical supports over here on the left-hand side.
So, at the current moment, any buys from the pink zone should be targeting the yellow zone or the blue zone. If you didn’t do that and you’re looking to trade in the direction of the downtrend, the closest possible you can get to that yellow zone will reduce the amount of risk that you take on any sells in the direction of the downtrend. Just be aware that I think if it breaks above here, we’re likely looking for that next surge higher and a change of the overall trending pattern, which could be a return of the red trend line direction that we’ve seen since September of 2012.
The pink and the yellow-shaded area are major areas of decision. We could even call this yellow-shaded area resistance right now because right now the market, for the past ten days, again, has been holding underneath that yellow-shaded area. So, again, if you bought it in the pink zone, the target is the yellow zone and the blue zone. If you didn’t buy it in either one of those places, I don’t suggest buying it right now. I don’t think this is a good opportunity to buy it until or unless it breaks through this blue trend line and through the yellow-shaded area, and through the last highs by the way that sit over here into that yellow-shaded area.
So, it needs to break through all this before I would buy it again if you’re not already in a buy. So, the buyers from the pink zone holding profit. If you’re not in a buy, it either needs to go back down to the pink-shaded area or break above the yellow zone before you would buy it. Sellers on the other side of this are thinking about the yellow-shaded area that’s held for the past eight, nine days as resistance. They’re thinking about this as a potential selling opportunity. Risk or stop loss would go above the yellow zone because if it breaks there, I think we’re looking for the market to turn all the way back up to that blue-shaded area. So, that’s what we’re looking at on the Daily Chart.
Let’s take it down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, here’s an interesting dynamic to all of this, and that’s the bank flow levels yesterday. The bank flow levels yesterday, when we were in the Trade Room, we were right about halfway between those bank flow levels. 50-50 shot going up or down to the bank flow levels. Today we’re seeing it approach the yellow-shaded area and getting closer to where the sell levels are. The sell levels yesterday went between the 1.0787-level and the highest point was 1.0827. So, you could see that range there where the bank flow sell levels are. We’re approaching that into the yellow-shaded area.
The buy levels were all the way down here at the bottom, into 1.0683, down towards 1.0657. Never saw that approach, but it gave us a little bit of a hope for a buy bias from the pink-shaded area for the USDCAD today. So, again, this is our target. If you’re in a buy, you should be looking to protect profit the closer you get to the yellow-shaded area, expecting resistance. Now, I think today if we continue to see the bulls in control of this, it wouldn’t be too hard to see these bank flow levels push a little bit higher towards this blue-shaded area, where the next Fibonacci levels sit by the way.
Remember those fibs that I drew on the Daily Chart. You could see them clustered here in the yellow zone. We could see the next levels of Fibonacci sitting up here into the blue zone. So, clearly a break of the yellow zone, the blue zone is our target for the next resistance high. Again, I don’t think I would buy it unless it broke through that yellow-shaded area and these last resistance highs. You know, if you wanted to, you could probably make an argument for bringing this line down to about right here and widening out this yellow-shaded area just a little bit, down to the 1.0665-level. Not because of the current candle, but because of these candles way back here, eight, nine days ago that you could see that resistance. So, going between 1.0765 now and 1.0790 is the yellow-shaded area. Break above that, the blue zone. Holding here definitely has a potential to fall back to the pink zone. So, if you’re going to sell it, you want to sell it, target the pink zone or lower for the USDCAD today.
