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I’m getting started today with the US Dollar versus the Canadian Dollar [USDCAD]. Starting here, on the Daily Chart, we can easily see that this currency pair has been in an uptrend for quite some time. We could see the longer-term trend. Even coming from the left-hand side of the chart, starting back in 2012, has been in long-term uptrend, and the shorter leg of that trend – the second, shorter blue trend line that we see here – representing the closer leg of the uptrend. So, we see a longer-term uptrend and a shorter-term uptrend, as the market has continued to pressure higher from down into the 0.9000 now above the 1.0-level.
Now, challenging again into historical key resistance, we follow this backwards in time. This purple-shaded area at the very top of the chart. We could see the last time we were here. In September of this year, we found resistance for several days and became a reversal point to challenge back into the longer-term trend line. Follow it back a little bit further; we could see back in July – in the beginning of July, end of June – finding resistance in that same purple-shaded area. The purple-shaded area at the top of the chart goes between the 1.0550-level and the 1.0580-level. So, it’s about a 30-pip zone, where we could see some resistance at the bottom of the purple-shaded area and resistance at the top, showing that this is an entire zone of resistance.
Now, follow it back to the current timeframe. Last trading day, which was Friday, we saw resistance into that purple-shaded area and a fall back down here into the 1.0500-level. Now, again, we see the market open, a little bit of a gap from the weekend, and a push back into the upper 1.0500s. It’s my expectation: as long as it stays underneath the 1.0580 level. And you can follow it back in time, and what I mean by staying underneath it is the price holding over a longer period of time. And this is the Daily Chart, so if we’re going to see a breakout above a this resistance, it would need to break out above here on the Daily Chart. When I look for a break, I’m looking for an open and a close, a clear candle body above that level.
Just simply a price push through there or a spike above it, like we see back here into the beginning of July. Simply a price spike above it like we see over here with this wick doesn’t tell me that the price has broken through this resistance zone. I’m going to need to see a clear candle body open and close above 1.0580 before I have confidence that we’ll look for a continuation higher. As long as it doesn’t do that, holding within this purple-shaded area or underneath it, we likely look for a turn back down to the supports, which is this orange-shaded area. And there’s, of course, precedent for that. If we go back again, back to those same timeframes, back into August and back into June and July, we could see the market bouncing around between the purple and the orange-shaded area that sits down here into the upper-1.0400s. There’s precedent for us to go into consolidation or ranging between the orange and the purple-shaded area.
Now, the trend is the main focus, so if you’re looking for an opportunity to trade in the direction of the trend, which is an uptrend, your expectation is that you would buy on dips into support or breaks of resistance. So, keeping that in mind, trading in the direction of the trend, buy on dips into support or break of resistance, right now, is not your opportunity to buy it, because it’s holding underneath resistance. It hasn’t broken it, or it’s not dipping into support, which would be down there closer to the orange-shaded area. So, buying in the direction of the trend – not really something I’m looking to do right now; as long as we’re holding within or under that purple zone, or haven’t made a dip into support, into the orange-shaded area.
Now, the other side of it is if we are looking for potential reversal indicators, this is the spot that you’d likely look for indications of reversal. It could be candlestick formations like a shooting star candlestick or an engulfing candle. It could be simply changes in the price pattern where, in an uptrend, we see higher highs and higher lows. If we start to see lower highs and lower lows, those are the types of clues or indications of trend change or reversal that we’ll look for, and this is the spot that we look for them to happen, because the last two times we challenged into this purple zone, that’s what we see happened back there.
Now, the Forex Black Book trend bar is bright green, giving us a bullish trend bias. And that’s not too hard to see. The longer-term and shorter-term trends are in agreement to go up, so it is bright green. It doesn’t mean it can’t go down. It definitely can go down because we’re reaching into a critical area of resistance and trends do change all the time. They go from uptrends to downtrends. So, we don’t want to take that for granted. We want to wait for the right timing. And with the Forex Black Book, the right timing to trade that will typically be after a dip down. We need to see the momentum of the market dip a little bit, and then the shift back in the direction of the trend. And we have not seen that, at least yet this week.
Take that information down to the 4-Hour Chart. And when we look for it, we’re looking for that dip and a shift back up here on the 4-Hour Chart. We’d need to see it to go down. Then a green arrow to go back up, very similar to what we see right here. We saw the market dip here last week between the November 19th and the November 20 timeframe. We saw a little bit of a dip closer to the blue-shaded area. Then we see a green arrow and the rally rise higher. So, what we need to see a dip again, a green arrow, and then the rally higher. Last week’s bank flow levels sitting right here into the purple zone give me less confidence in the buy side right now and more confidence that we’re likely – more likely – looking for resistance and a little bit of a dip back down.
So, my expectations today would be: as long as it holds within or under this purple-shaded area, I’m looking for clues to reversal to go back down. If it breaks above 1.0580, I look for continuation to go higher. Watch for today’s bank flow levels. See where they round out today. If they round out about where they were last week, here into the 1.0580s, I have a higher expectation that we’re looking for this to go back down towards the orange-shaded area. 1.0500 down to 1.0470 – that’s the orange-shaded area. Of course that becomes our next support potential to bounce back up in the direction of the trend, or a break underneath 1.0470, look for the continuation lower and a change of the trending pattern, which right now is higher highs and higher lows.
We could even put here, on the 4-Hour Chart, a shorter-term trend line. This red trend line. As long as it stays above that, we are within the parameters of an uptrend. That would, of course, be back down into the orange-shaded area. I will definitely be looking for potential support down there. So, staying under the purple zone, reversal. Break above the purple zone, continuation. Dips into the orange zone become new buying opportunities in the direction of the trend for the USDCAD today.
