Wednesday 28th January: Daily technical outlook and review.

EUR/USD:

Weekly Timeframe: Current trading action on the weekly timeframe shows buying interest coming from a weekly Quasimodo support level at 1.1109. To the upside, we see potential resistance sitting around a nice-looking weekly supply area at 1.1678-1.1458.

Daily Timeframe: The rebound seen from the fresh daily demand area at 1.1045-1.1127 (surrounds the aforementioned weekly Quasimodo support level) extended higher recently, which consequently saw price hit a long-term daily swap level coming in at 1.1378. Taking out this level could see another round of buying towards a daily decision-point supply area seen at 1.1678-1.1540 (located deep within the aforementioned weekly supply area).

4hr Timeframe: Recent developments on the 4hr timeframe reveal that price has broken above 4hr supply seen at 1.1368-1.1313, and as such forced the market to test the 1.1400 handle.

Buying the Euro here based on the weekly Quasimodo support level at 1.1109 could potentially cause unnecessary stress, especially with price currently trading around a daily swap level (see above) and 1.1400 seen holding the market lower. Waiting for price to break above and retest the minor 4hr swap level at 1.1458 would be a far more conservative approach (as per the red arrows), and one that we firmly support.

Waiting for the above to happen on the 4hr timeframe will with a high probability pave the way north up to at least 4hr supply sitting at 1.1678-1.1589 (located very deep within the aforementioned daily decision-point supply area), and thus opening up a nice profit target highlighted in green.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

GBP/USD:

Weekly Timeframe: Current action on the weekly timeframe shows buying interest entering the market within a major weekly demand area at 1.4812-1.5097. Assuming that the buyers can continue with this tempo, we feel there is a good chance that price will likely hit a major weekly swap level coming in at 1.5270.

Daily Timeframe: The rebound seen on Friday from the daily demand area at 1.4812-1.4949 continued to extend higher yesterday, which as a result forced the market to break above a daily supply area seen at 1.5211-1.5140. This move could have potentially triggered buy stops from traders attempting to fade, and thus set the stage for a possible continuation move up to the aforementioned weekly swap level.

4hr Timeframe: The 4hr timeframe shows price recently attacked the 1.5200 handle, and at the same time broke above a very significant high seen marked with a red arrow at 1.5211.

The reason for its significance is this, to the left we see consumed supply, (take note of the obvious consumption wicks seen at 1.5233/1.5265/1.5268), the high is effectively the last supply obstacle to a move towards the 4hr supply area visible at 1.5318-1.5272. However, we have to take into consideration that the buyers may not have the available liquidity to push above 1.5200 at this time. In that case, a move lower will likely ensue down to a beautiful-looking 4hr decision-point demand area at 1.5058-1.5103, where at which point we’d begin watching the lower timeframes for buying confirmation around the 1.5109 mark.

Given the points made above, we could do one of three things here:

1. Watch for selling confirmation around 1.5200, and strictly target 1.5109. The reason we say strictly is simply because we’re currently trading out of higher-timeframe weekly demand (see above) at the moment.
2. If price declines in value down to the 4hr decision-point demand area at 1.5058-1.5103, look for buying confirmation on the lower timeframes around 1.5109.
3. And finally, if price breaks above 1.5200, we could look to play the retest and target 1.5266, seen just below the aforementioned 4hr supply area.

Current buy/sell levels:

• Buy orders: 1.5109 [Tentative] (Predicative stop-loss orders are seen at: 1.5048).
• Sell orders: Look for selling confirmation on the lower timeframes around 1.5200 (Predicative stop-loss orders are seen at: dependent on where one confirms this level).

AUD/USD:

Weekly Timeframe: The weekly timeframe currently shows the buyers and sellers battling for position within a major weekly demand area coming in at 0.7699-0.7974.

Daily Timeframe: Yesterday saw the buyers attempt to trade higher from Monday’s bull day, but consequently found 0.7973 too resistive to overcome. It will be interesting to see what the 4hr timeframe has to say about this…

4hr Timeframe: The 4hr timeframe actually shows that the buyers struggled to trade above the mid-number 0.7950 yesterday. This was clearly a strong intraday resistance, which we believe to now be clear of supply i.e. sell orders. Just take a look at how deep this level was penetrated; a ton of traders’ stops got taken here. Therefore, we still believe the Aussie is heading northbound…

The reason being is simply because price is currently trading within weekly demand, and the daily timeframe shows there is room to rally higher (see above). We know this is effectively going against the overall down trend here, but we believe it is worth the risk. So, where does one look for buy trades? The 0.7900 handle looks inviting, but with 4hr demand lurking just below at 0.7856-0.7892, it is just begging to be faked. Therefore, the 4hr demand area it is… First take-profit target for this trade comes in at 0.7950, second at 0.8000, and finally, the third at a 4hr supply seen at 0.8050-0.8016.

Current buy/sell levels:

• Buy orders: currently watching for lower-timeframe confirmation around the 4hr demand area at 0.7856-0.7892 (Predicative stop-loss orders seen at: 0.7849).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

USD/JPY:

Weekly Timeframe: Unfortunately, there is very little new to report on the weekly timeframe as price continues to meander within last week’s range (118.85/116.91). From a long-term perspective, our bias remains north on the USD/JPY as long as the buyers continue to hold out above the major weekly swap level coming in at 115.50.

Daily Timeframe: Little price movement on the daily timeframe has resulted in the market remaining capped between a small daily supply area coming in at 119.95-119.14, and a daily demand area seen at 115.55-116.38. It will be interesting to see what the 4hr timeframe has to say about this…

4hr Timeframe: The 4hr timeframe shows that the buyers and sellers continue to battle for position between a 4hr supply area seen at 118.84-118.52, and a 4hr demand area at 116.91-117.22. And as such, much of our previous analysis remains the same…

With all of the above taken into consideration, we can see that the weekly timeframe is trading just above a weekly swap level (see above), while the daily timeframe on the other hand shows that in order for the market to continue north, price would need to take out the near-term daily supply area mentioned above at 119.95-119.14.That being the case, we believe there to be two options for any bulls out there:

1. Trade within the current 4hr range from the aforementioned 4hr demand area (tentative buy orders are seen just above at 117.25). This is clearly a respected zone, and will likely react again. However, we personally would only take a trade here with lower-timeframe confirmation since fakeouts are so very common within consolidative areas such as here.
2. The second option is a more conservative one, and requires patience. One would have to wait for price to close above the small 4hr supply area coming in at 119.31-119.12 (located just within the daily supply area mentioned above at 119.95-119.14). This will be the cue to begin looking for fresh longs as the path would then likely be clear up to a nice-looking 4hr supply area sitting at 120.73-120.39.

The approach to selling this market is a little different as we mustn’t forget that price is currently trading above a major weekly swap level (see above). Does this mean that selling is out of the question? Absolutely not. Areas to watch for selling action are as follows:

1. The 4hr supply area at 118.84-118.52, which forms the upper limit of the current 4hr range. Entering short at around 118.47 is a valid sell. But one that (in our opinion) requires confirmation.
2. The 4hr supply area that was just mentioned at 119.31-119.12 (tentative sell orders are seen just below at 119.08). This area is effectively the last line of defense for the aforementioned daily supply area. Again, we would only consider shorts here with corresponding lower-timeframe confirmation for reasons stated above.

Current buy/sell levels:

• Buy orders: 117.25 [Tentative] (Predicative stop-loss orders seen at: 116.85).
• Sell orders: 118.47 [Tentative] (Predicative stop-loss orders seen at: 118.88) 119.08 [Tentative] (Predicative stop-loss orders seen at: 119.38).

USD/CAD:

Weekly Timeframe: The weekly timeframe shows that the buyers conquered yet another key weekly swap level last week seen at 1.2260. This move has potentially opened the gates for prices to challenge a major weekly Quasimodo resistance level seen at 1.2765.

Daily Timeframe: Yesterday’s trading action shows that the sellers could be making a comeback, as prices turned bearish deep within a daily supply area seen at 1.2504-1.2385, although, at this point in time, it is really too early to tell if this is merely traders liquidating longs, or is indeed genuine selling.

4hr Timeframe: Recent developments on the 4hr timeframe show that price turned literally to-the-pip at the 1.2500 handle. This consequently forced the market down to 1.2400 where the buyers and sellers are currently seen pulling for position.

A convincing break below 1.2400 would likely attract further selling down towards 1.2300, where at which point things would get interesting. The green area constitutes what we believe to be a highly confluent buy zone. It consists of the 1.2300 handle, a weekly swap level at 1.2260, and a 4hr ascending channel support level (prior resistance – 1.1616/1.2016). Our team will (if price reaches this far of course) attempt to scalp here, effectively buying small positions to form one overall large position as price action proves itself, therefore, we’re ultimately going to be watching the 5/15 minute timeframes for confirmed long entries within this zone.

Current buy/sell levels:

• Buy orders: watching for confirmed buy trades between 1.2300/1.2260 (Predicative stop-loss orders seen at: 1.2247).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

DAX 30:

Weekly Timeframe: The weekly timeframe shows that selling interest came into the market at 10853, and as a result pushed prices back down towards the recently broken weekly trendline support (prior resistance) formed from the high 7347 (14/02/11).

Daily Timeframe: Yesterday saw the market take back most of Monday’s gains as prices declined 187 points (figure includes pre/after-market hours), and as already mentioned (above) saw the DAX retest the aforementioned weekly trendline support.

4hr Timeframe: All eyes are firmly fixed on the 4hr decision-point demand area (10584-10658) at the moment. This area could be the turning point at which the DAX rallies to new highs. As such, we have been closely watching the 30 minute timeframe for a low-risk high-probability buy entry. The 30 minute timeframe has so far seen prices rally north and take out some of the selling opposition around a 30-minute supply area at 10697-10658, which leads us to believe a reaction will likely be seen from a 30 minute demand area at 10592-10619 (seen deep within the current 4hr decision-point demand area). Therefore, a pending buy order has been set at 10621, with a stop below at 10575.

Current buy/sell levels:

• Buy orders: 10621 (Predicative stop-loss orders seen at: 10575).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

DOW 30:

Weekly Timeframe: The weekly timeframe shows that for seven consecutive weeks price has been hovering above an ignored weekly Quasimodo level at 17135, which has recently formed an inside bar pattern – anyone for higher prices???

Daily Timeframe: Even with the recent sell off seen yesterday, the daily timeframe still shows that the DOW is currently in a phase of consolidation between a daily swap level coming in at 17896, and a daily demand area seen at 17032-17186. What is more, notice the symmetrical triangle forcing price to compress inwards, this tells us that something may be brewing and it could be explosive.

4hr Timeframe: Recent developments on the 4hr timeframe show that price engulfed a 4hr decision-point demand area at 17397-17492. This move saw price trade down as far as 17281 (seen just above a 4hr Quasimodo and support from the daily symmetrical triangle formation) which was clearly supportive enough to allow the buyers back into play.

At this point in time, we feel we’ve clearly missed the boat on any long opportunities which is a shame since we believe there is clear potential up to at least the 4hr supply area seen at 17698-17663. That being the case, we are going to patiently sit on our hands and wait for price to move to a more favorable location.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

XAU/USD (Gold):

Weekly Timeframe: Last week’s trading action shows that price pushed above a weekly supply area at 1296.3-1269.3. This in turn leaves the weekly supply area seen at 1391.9-1328.0 clearly in the limelight for the time being.

Daily Timeframe: Yesterday’s sessions saw price react beautifully from a daily decision-point demand area coming in at 1271.9-1281.3. As long as the buyers can hold out above this area, we see very little reason why prices will not go on to attack the daily supply area seen at 1319.2-1308.6 lurking just above.

4hr Timeframe: The 4hr timeframe shows that price rebounded strongly from within a 4hr demand area seen at 1271.9-1277.1 (located within the aforementioned daily decision-point demand area), and as a result pushed prices northbound towards a small 4hr supply area coming in at 1299.0-1294.8.

So that we’re all on the same page here, let’s quickly do a recap. The weekly chart currently shows direction north, while the daily chart indicates bullish strength is in the market as price reacted heavily from a daily decision-point demand area (for levels see above). So, where does this leave the 4hr timeframe? Well, buying now would potentially cause unnecessary drawdown, and not to mention stress as we would effectively be buying into the aforementioned 4hr supply. Just to be clear here, our bias is indeed firmly long, however buying right now may not be the best path to take.

The recent drive into 4hr supply has likely consumed sellers (red arrow), and thus weakened this zone. The selling pressure from here may be enough to drive prices back down to the aforementioned 4hr demand area, where at which point we’d begin watching the lower timeframes for buying confirmation around the 1278.5 mark, and be looking to target 1305.20, the 4hr swap level seen just above the small 4hr supply area just mentioned, as per the green arrows.

Current buy/sell levels:

• Buy orders: 1278.5 [Tentative] (Predicative stop-loss orders seen at: 1270.43).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

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