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I’m going to get started today on the US Dollar versus the Canadian Dollar [USDCAD]. Starting here on the Daily Chart, over the past several weeks, I’ve been studying this falling wedge pattern that we see here on this chart. The red trend line defining the top of the wedge. The black trend line defining the bottom of the wedge.
Over the past several days, we saw the breakout above the wedge, but it never really got the bullish expectation that we were looking for. After breaking above the wedge, we expected a continuation higher. And over the past few days, we could see it just sliding down that red trend line. Never really breaking back below it, but just sliding down. Never getting a bullish look to the market.
Now, over the past two days, we’ve seen a little bit of a change and a turn in the direction that we’ve been expecting for the past couple of weeks. Finally finding some support back into the blue-shaded area, importantly, staying above our last low. If it would’ve broken through the blue zone and broken through this last low, the falling wedge expectation would’ve been shattered and we would likely look for it to go back down towards the green-shaded area. But most importantly, stayed within or above the blue-shaded area and above this last low, above the red trend line and the falling wedge, and now we see that bullish behavior returning back to the market.
Now, as it starts to go back up, we are now, once again, finding resistance at the top of this orange-shaded area. Follow it back in time and you could see back here in May 22nd, May 21st, and even May 20th, we find resistance right around the 1.0910-level. Well, that’s exactly where we’re challenging right now. Keep in mind the last time we were here, we saw the market push all the way up to the top of that candle, which was back up into 1.0938, 1.0940-level, and then return right back down. That was back on May 21st. We saw it pushing all the way up in towards the 1.0930s and 1.0940s, and turn around and get right back down.
So, we’re seeing an attempt to break above 1.0910 today. We’ll have to wait to see if it’s going to be a real break. A real break is confirmed by an open and close above the 1.0910-level and above that orange zone. We’ll have to wait to see if we actually get that. Going back even further in time along that orange-shaded area, you could see resistance back here. You could go back even further, all the way back here into February 19. You could see support on top of that same 1.0910-level. So, historically, 1.0910 has been an accurate level of support and resistance, and that’s where we’re challenging today. Once again, an open and close above there will give us confidence that we’ll look for the buyers to continue to pressure this higher, and that’s what we’ve been looking for, for the past two weeks and finally starting to see it.
So, if you’ve been following along with me and following that falling wedge expectation of eventual return of the buyers and have been buying it along with me, buying on dips into support, down maybe even towards the blue-shaded area, then we’ve come to profit now and you should begin protecting those trades, because if it turns out that we find resistance here again, we could of course see it start to turn back down again. So, if you’re in a buy from the blue-shaded area or anywhere between the orange zone and the blue zone, consider protecting your trades and protecting them from going negative once again.
What we’re doing is cheering on the buyers today. Cheering them on to break through 1.0900 and continue that bullish price action. Could it find resistance here and go back down to the blue zone? Absolutely, it could, so protect those trades if you are in it. If you didn’t buy it down here into the blue zone or along the red trend line at any point, then I don’t think I would buy it right now. We’re looking for the breakout. Again, if you go back here, you could see it never broke above there, so that’s what we’re looking for today. A breakout, open and close above 1.0910 gives way to the next push into the 1.0940s, 1.0950s, maybe even towards the 1.0980-level, or higher if it breaks through the purple-shaded area today or even later on this week.
We have some significant Canadian news that could sway this currency pair over the next few days. Of course there’s also significant US data that could sway this currency pair over the next few days. So, really what we’re looking for is a breakout. The best opportunity to buy was way down here towards the mid-1.0800s and the blue-shaded area.
So, let’s go ahead and put a couple of arrows here on the chart, showing our expectations. Buying would be above the orange-shaded area. 1.0910 or higher. Buying above there. A buy, again, back down towards the blue zone could be a possibility over the next few days if we see it fall back down. Those are two opportunities. Resistance will likely be the purple-shaded area today. That’s in towards the 1.0950s to 1.0980s, into the purple-shaded area. If it can break above the orange zone today, if it gets back below 1.0885 or so, under the orange zone, we will look for the turn back down to the blue zone.
So, these are our four expectations for the day today. Let’s take all of that information down to the 4-Hour Chart and begin looking at this in a little bit more detail here. Squeeze it out just a little bit. Let’s go ahead and put this arrow here. Let’s bring this one back under the orange zone. Let’s put this one down here in the blue zone, and of course the purple zone up here. There’s our four arrows. We’re seeing an attempt. Again, we saw an attempt back here and back here. So, just be cautious. I would actually prefer to see an open and close above 1.0910 before I’d have confidence it’s going to continue higher.
So, if you’re not already in a buy, that’s probably what you’re going to look for before you would consider buying towards the purple-shaded area. An open and close above 1.0910. Otherwise, back underneath 1.0885, you’re looking for it back to the blue zone. Something else that we’ve been studying over the past several weeks is, of course, the bank flow levels, noting that over the past several weeks the bank flow levels have been confirming support down here in the blue zone. We finally see the buyers with those bank flow levels coming back in and driving this back higher.
Today I would expect that our bank flow levels may rise up a little bit to meet the market just underneath the orange-shaded area, just noting that we don’t have any sell levels above the market. That’s something very interesting. Red trend bar. Forex Black Book is bearish. Interesting there. It’s been bearish for quite a long time. What does it take to turn a trend bar green? That’s probably what you need to ask yourself.
What would it take to make that trend bar at the very bottom of the chart turn green? Well, it takes buying behavior. It takes a bullish market to turn that green, and that’s what we’re seeing now. Does that mean it has to turn green? No. What we’re looking for, over the next several days, going into next week, is: is there going to be enough bullish behavior to turn that trend bar green? Until then, I’m going to continue to focus my efforts on the buys that I’ve been in, looking for the break above the orange zone and a continuation towards the purple-shaded area today for the USDCAD.
