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Transcript of Video
I’m going to begin the day today on the US Dollar versus the Canadian Dollar [USDCAD]. Starting here on the Daily Chart, this currency pair has been in an uptrend for quite some time. We started all the way down here at the bottom left-hand side of the chart, into the low-1.0600s, and over the past few days, we’ve seen the market challenging all the way up here into the 1.1600s at the top right-hand side of the chart. So, quite a long uptrend that this currency pair has been in.
Higher highs and higher lows continue to help us identify this as an uptrend. I mean that’s really how we’ll understand that the pattern of the trend is changing, and that would be lower highs and lower lows. And so, we have to go up here to the top right-hand side of the chart and determine. Do we still see the pattern of the uptrend or are we starting to see clues or evidence to a trend change?
And so far, at this current point, I think we still are within the pattern of an uptrend. If we continue to look for those higher highs and higher lows, we still see a higher low here along the blue trend line. At the top of the yellow-shaded area, which is of course our current resistance zone, we look in between – we’ll call it – 1.1620 and 1.1660. That’s the yellow-shaded area. Just at the top of that yellow-shaded area happens to be a Fibonacci level from the Monthly Chart, and we’ve looked at this over the past couple of weeks in the Trade Room and in here in the videos.
At the top of that yellow zone, you go to the Monthly Chart. Previous downtrend, .618 Fibonacci retracement level of a previous downtrend, and that’s currently where we’re finding resistance for the USDCAD. As long as it stays underneath that yellow zone and really that 1.1660 Fibonacci retracement level, there’s potential for that reversal to happen, but we haven’t seen evidence of that reversal yet. We’re just seeing a little bit of a pullback within the overall uptrend. I still think the best opportunities to trade the USDCAD will be trading the uptrend and looking for, eventually, a breakout above that current resistance level.
We also see that over the past few months, we’ve created somewhat of a rising wedge here. You see the resistance highs along the red trend line, the support lows along the blue trend line. That rising wedge there gives us of course the clue that we’re still in an uptrend and really the only change of that pattern would be the breakdown of that blue trend line and that blue-shaded area that you see there right along those red, horizontal lines. So, all that to say we’re still in an uptrend. That still remains the overall focus. We’ll continue to watch for clues and evidence of resistance and reversal, but so far the trend is still up.
Let’s go ahead and zoom it in a little bit here on the Daily Chart. We could see the support zone. The red, horizontal lines. The blue trend line coming in here to play around the 1.1555 to 1.1575-level. Four days now finding support right along that blue-shaded area and that blue trend line. So, the best opportunities to buy this currency pair at the current moment would be close as possible to that support zone. It provides lower risk and higher reward. You don’t really want to buy it right now because we know that the yellow-shaded area is resistance. So, as long as that holds as resistance, you don’t want to buy it too close to there. You want to buy it closer into the support. It provides a lower risk, higher reward opportunity.
And clearly, the only things that we’re looking for other than that would be the breakout above the yellow zone or the breakout below the blue-shaded area, and that would be underneath our current support. Let’s go ahead and take all that down to the 4-Hour Chart. And as we get down here closer to the market, let’s drag some of these levels over. We’ll pull this over and, as I said, as long as it stays within or under here, I’m expecting resistance. Only a breakout above this yellow zone do we look for it to continue to pressure higher.
We already know that this blue-shaded area, over the past few weeks, has been our support. Well, four or five days now has been our support, and a breakout underneath there, we’d look for it to continue to go down and change the trending pattern back into a downtrend. We may not have enough volume this week to pull it out of this area of congestion, so there could be an opportunity this week to sell resistance or buy support. I still think buying support in the direction of the trend is still going to be the overall effort here, close as possible to 1.1550, the blue-shaded area, but I can’t deny the fact that we could have lower volumes in the market this holiday week and there could be reason to believe that we’re going to find resistance here at the yellow-shaded area over the next few days.
So, a couple of opportunities here. You could trade between the yellow and the blue-shaded area as some range trading, trading this congestion here. I would expect that you want to be as close as possible to 1.1650 at the very top of the trend. That at least provides a lower risk if you’re going to sell this currency pair. If you’re going to buy it in the direction of the trend, which I believe is still the overall opportunity here, we’re buying as close as possible to 1.1575. Eventually, maybe this week, maybe next week, maybe not until the beginning of the new year, we’ll look for either a breakout above the resistance to go up in the direction of the longer-term uptrend or we begin to trade the trend. We look for a breakout underneath 1.1550, and we’ll look for it to charge back down into the 1.1400s for the USDCAD over the next several days.
