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I’m going to get started 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. We go all the way back to September, where we started down here into the 1.0100s and started climbing all the way up to the top of the chart, into the highest highs, into the upper-1.1200s.
Now, over the past several months, if we go back here into January we could see that the market has been bouncing around between the highs up here into the 1.1200s and the lows down here into the 1.0900s. So, the question of course is: are we going to see a continuation of the uptrend – a higher low and a new higher high being made – or are we looking for a change in the direction of the trend?
Well, we can’t know that for sure, but we can watch for clues to those potential market moves. First off, we continue to find support higher than the previous low, and I’ve put these three X’s here to help us identify the last three lows. Of course the first low down here towards the 1.0900-level. The next higher low was a little bit higher, there into the mid-1.0900s, and I put it as a red X because that’s the middle low that we see here.
And of course the current low, where over the past five or six days the market has held as support into the purple-shaded area and created a higher low. Now, as the market finds support here, there’s potential for a turn back in the direction of the trend. As long as we don’t make a new lower low, there’s potential that this market finds support and starts to move back in the direction of the trend. If it breaks down through this low and subsequently breaking through the low here in the middle where the red X is, we’re likely looking for a change of the overall trend and a turn back down, likely down here towards the 1.0800-level – the blue-shaded area that you see here in the middle of the chart.
Now, over the past several days, the Forex Black Book indicator has been red, implying bearish price action. We’ve seen that before within the trend, where Forex Black Book trend bar turned red and then it started move back in the direction of the trend and turned green. It went red here while it was in that period of congestion, and then it turned green as it started moving back in the direction of the trend. Now we’ve been red for quite some time, of course because of this period of congestion or ranging here for the larger timeframe. And of course, if it starts to move back higher in the direction of the trend again, we could likely look for the trend bar to turn green one more time.
The key point of decision will be this purple-shaded area today. As long as hold here as support, potential to rally back higher. Breaking the support, we look for it to begin turning back down in the direction of the downtrend.
Let’s go ahead and take this information down to the 4-Hour Chart. And there again is that period of congestion that we’re seeing right now. Over the past two or three days, we’ve seen it holding between the yellow-shaded area as resistance, the purple-shaded area as support, and we could see that over the past three or four days, the bank flow levels have kept the market from pressuring lower once again.
So, support here into the purple-shaded area will still be the name of the game for the USDCAD today. Let’s go ahead and put some arrows on the chart here. As long as we stay above this purple-shaded area and above our bank flow levels and above the previous low that we see over here where the red X is, then I expect we could be looking for a turn back up in the direction of the longer-term daily trend. If we start to breakdown through this low, breakdown through our purple-shaded area again, and pressuring down through the bank flow levels, we likely are looking for a continuation of this downward pressure.
So, today will be a critical decision point for the USDCAD today. Let’s go ahead and put some arrows up here. Into the yellow-shaded area, we could also look at that as our current resistance. We’ve seen that over the past three or four days. This is our current resistance. Anything above that resistance, above that yellow-shaded area, we begin pressuring higher once again. Take a look at where our bank flow sell levels have been over the past three or four days also. All the way up here into the mid to upper-1.1100-level. Let’s see. Yesterday’s bottom level was 1.1119. The top level was 1.1159. So we could see where the bank flow sell levels are. The buy levels are a bit closer, so we’re looking for that buying pressure from the bank flow levels to support the market and turn it back higher.
A breakdown of this support, of course as I mentioned, likely looking for it to go back down. If it gets under the green-shaded area, down here at the bottom, which is the last low that we see over here on the left-hand side, the next low that we would expect to see would be back down into the 1.0800s for the USDCAD today.
