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Transcript of Video
I’m going to begin the day today on the US Dollar versus the Swiss Frank [USDCHF]. Starting here on the Daily Chart, we could see that this currency pair has been in an uptrend for quite some time. We go all the way back to March of 2014, of this year, and we could see we started down there close to the 0.8700-level.
Over the past several months, we’ve seen the climb pushing all the way up in towards the 0.9800-level at the very top of the chart. Now, over the past few months – September, October, November – we’ve seen a little bit of a rising wedge developing here. There’s two really expectations within this wedge. Number one: we could stay within the wedge. We can just continue to bounce on the red trend line at the highs and the blue trend line at the lows and continue to bounce around in there as it consolidates or contracts within that wedge.
The second thing we’ll look for of course would be a breakout. And the implication a lot of times with a rising wedge like this is that there’s a higher probability or a high probability that if it breaks out underneath the blue line and underneath the lows within the wedge that we’re looking for some temporary reversal. We’re looking for it back down to the purple or maybe even back down here towards this longer-term red trend line and into the 0.9500-level.
So, that would be two things to look for today. It’s either going to find support and go back up within the wedge or it’s going to breakout and go back down. What we want to do is identify that support and devise a plan that has low risk and high potential reward around this pattern that we’re seeing here on the Daily Chart. One last thing before I go down to smaller compressions. Well, actually two.
Let’s put two different Fibonacci retracement levels of the uptrend. Let’s go from the lowest low. In fact, I’ll just start right here, where the bottom of the red trend line is, and go to the highest highs. So, that’s going to be very interesting because if we get the breakout of the wedge, that gives us something to shoot for. First off, the .236 fib sits at 0.9554. That’s at the bottom of the purple-shaded area, so we know that that’s a potential support – .236 – at the bottom of the purple zone on the break of the wedge. It hasn’t done it, but that’s something to shoot for.
Another one down here, the .382 fib, and see if I can get this selected down here, is this green-shaded area that sits down here, and that’s down there. The .382 of that long range sits down here into the green zone. So, that’s quite a long ways away, not really part of today’s scenario. I just wanted you to see where it is in case we do see some further reversal. Now, that’s a longer-term outlook.
Let’s actually take a little bit of a shorter fib, and I’m going to zoom it in for this. Let’s take a fib from the low of the wedge, the bottom of the blue trend line, to the resistance high. And that changes things up just a little bit. We see the .382 of that range, from the bottom of the wedge, blue trend line, to the top. The .382 sits at 0.9642. Guess where that is. That’s right here, where our current support is at the blue-shaded area and the bottom of the wedge. That’s very interesting. .382 there. 50% sits down here at the purple-shaded area, so now we have the 50% of the short range and the .236 of the long range sitting right here at the purple zone, giving us clear evidence that if we break the blue-shaded area, the blue trend line, that becomes our next area of support. You could see that right here also.
.786 of the shorter range. Well, .618 just underneath the purple zone. .786 down here at the yellow, and by the way, .886 right at the green-shaded area. So, the yellow and the green become potential targets on the break of the blue-shaded area and the blue trend line. Of course, at this point, we haven’t done that. So, there’s a great possibility that this becomes support and we look for it to turn back towards the top of the wedge and maybe even make a new high within the overall uptrend.
I’ve said this many times over the past several days in the Trade Room. Pretty much all week long, every day, I’ve said don’t forget to trade the trend because so far the trend has not changed. The trend is higher highs and higher lows. And at this current point, we still have that pattern developing here for the USDCHF. There has not been a change of the trend pattern, so it’s still an uptrend. So, don’t forget about that and don’t forget that that would be your best opportunities to trade the USDCHF and many other currency pairs.
Now, I know the Forex Black Book has turned red this week with the little bearish movement within the wedge. We’ve seen it turn red. Could be a precursor of things to come, but I still would look for a change of the trending pattern up here, which would be a new lower low, which we really don’t have yet here on the Daily Chart. So, my primary focus is still for buying, looking for it to go back up. Very interesting that the .382, 0.9642, the blue-shaded area, and the blue trend line.
Let’s go ahead and take that information now down to the 4-Hour Chart. Now that we have all that devised, we could see the blue-shaded area, the blue trend line are historical supports that you see over here on the left-hand side of the chart. And really just take a look at the past two or three days. We’ve seen many challenges of the blue zone and bounces back to the pink zone. Challenge. Bounce. Challenge. And now we’re looking for that bounce once again. The pink zone of course would be some intraday resistance.
Let me zoom it out one twice, so we can get these a little bit more closer to the current market. These shaded areas, so I can grab these here. And one more time. Zoom it in. There you go. So, here’s the blue zone. Our support. If you look for a buy today, if you’re buying the trend, which is still up, then here at the blue zone provides a fairly minimal risk. You don’t really want it to break underneath there because if it does, we go back down into the 0.9580s or possibly the 0.9550s. So, blue zone is your support today. Buying here, targeting the pink zone, targeting the green zone, targeting the yellow zone on the way up within the rising trend and the rising wedge.
The risk there is that it breaks underneath. So, if it breaks, opens and closes, by the way, in my opinion, underneath 0.9620, 0.9625, the blue zone, then we look for it to go down. That doesn’t mean you immediately look for a sell. Often times, with the rising wedge, if you’re looking at the breakout as a selling opportunity, you look for the breakout, a retest underneath it as resistance, and then that becomes a fall. Again, that’s kind of a break pattern that I would look for most of the time. A breakout and a retest. So, if it breaks under support, you look for it to test that same support as resistance before entering. If it breaks a resistance, you look for it to come down and test that previous resistance as support again before you look for a buy.
So, if it breaks the rising wedge under the blue zone, look for it to come up underneath, use that as resistance, and then look for your selling opportunity. So, at least at the current moment, buying here, looking for it to go back up within the trend and the wedge is still an opportunity. Breakout here, we change that opinion and we start to look for it to go back down for the USDCHF over the next few days.
