Friday 16th January: Daily technical outlook and review.

EUR/USD:

Weekly Timeframe: The weekly timeframe shows that the weekly Quasimodo support level at 1.1758 recently gave way, and as a result saw prices continue south hitting a fresh weekly demand area coming in at 1.1373-1.1617.

Daily Timeframe: The recent selling has seen price break below a ‘mini daily demand’ area at 1.1700-1.1722, consequently forcing the Euro to hover just above a daily demand area seen at 1.1443-1.1533 (located within the aforementioned weekly demand area).

4hr Timeframe: The latest developments on the 4hr timeframe show that the 1.1700 handle has been well and truly consumed. This subsequently saw further selling down towards 1.1600, where at the time of writing, a little buying interest is currently being seen.

From a higher-timeframe perspective, now would be a great time to be looking for buying opportunities on the lower timeframes, but with the Eurozone being in the state that it is, any buy signal in our opinion must have lower-timeframe confirmation. That being the case, buying from 1.1600 using lower-timeframe confirmation is something we intend to watch for today. Selling on the other hand will only be permitted if price breaks and retests 1.1600. Again, lower-timeframe confirmation here would be advised since we would effectively be then selling into higher-timeframe demand at that point (see above).

Current buy/sell levels:

• Buy orders: watching for lower-timeframe confirmation around 1.1600 (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

GBP/USD:

Weekly Timeframe: The weekly timeframe shows that the buyers and sellers are currently battling for position in between a weekly demand area at 1.4812-1.5097 and a weekly swap level coming in at 1.5270. It will be interesting to see what the lower timeframes have to say about this.

Daily Timeframe: The daily timeframe shows that the upward momentum seen from the daily Quasimodo support area at 1.5007-1.5097 (located just within the aforementioned weekly demand) seems to be crumbling, as sellers appear to be entering the market around a minor daily swap level visible at 1.5267, which is only three pips lower than our major weekly swap level mentioned above at 1.5270.

4hr Timeframe: Recent developments show that an ascending channel is beginning to form, limits can be seen at: 1.5033 (08/01/15) 1.5192 (11/01/15). As bullish as this sounds, all this may be is a bearish continuation flag in motion. At the time of writing, price is currently trading around a small 4hr decision-point demand area at 1.5145-1.5171. Ultimately, entering long here is something we cannot take part in simply from a risk/reward perspective as potential resistance is looming just above at 1.5200. Likewise, a break lower would however open the doors for prices to challenge 1.5100, which again from a risk/reward standpoint would restrict us from considering shorts here, unless of course one were to enter on the very low timeframes with a small stop, then the risk/reward would very likely be in your favor if targeting 1.5100.

Therefore with it being Friday today, and all of the above taken into consideration, we feel standing on the side lines here may be the best path to take for the time being.

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).

AUD/USD:

Weekly Timeframe: Last week saw price push below a weekly demand area at 0.8064-0.8460 which consequently triggered buying in the market. However, so far this week, the sellers have been able to hold the market lower at the underside (prior support) of a recently broken descending channel (limits can be found at 0.9556 – 21/10/13 … 0.8846 – 05/08/13). It will be interesting to see what the lower timeframes have to say about this.

Daily Timeframe: In the previous analysis, we reported that the path was very likely clear north for further buying to be seen up to a daily swap area coming in at 0.8314-0.8405. As we can all see, further buying was indeed seen, but missed the daily swap area by a few pips.

4hr Timeframe: The 4hr timeframe shows that the AUD/USD pair spring boarded itself off of a minor 4hr swap level at 0.8149, trading past 0.8200, and spiking above a 4hr supply area seen at 0.8273-0.8250. We feel we can safely assume that most of the sellers here are very likely consumed now, which in turn potentially clears the path north towards 0.8300 (lingering just below the aforementioned daily swap area). Assuming that the buyers can successfully hold out above 0.8200 today, we’d be interested in buying around this region, targeting 0.8292, just below 0.8300.

For anyone considering taking this trade, we would advise using some sort of confirmation signal before pressing the buy button, and also to remain aware that there has been some selling pressure seen on the weekly timeframe recently (see above) , therefore closely monitoring your trade is a must here.

Current buy/sell levels:

• Buy orders: watching for lower-timeframe confirmation around 0.8200 (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

USD/JPY:

Weekly Timeframe: Current trading action shows that the USD has seen a decline in value, consequently forcing price to trade just above a major weekly swap level coming in at 115.50.

Daily Timeframe: The buyers and sellers are currently seen battling for position within a daily demand area at 115.55-116.38 (located just above the aforementioned weekly swap level). In the event that fresh buyers enter the market here, we see very little stopping price from rallying up to a minor daily swap area coming in at 117.22-117.64.

4hr Timeframe: The 4hr timeframe reveals that price is currently trading relatively deep within a 4hr demand area at 115.55-116.06 (located deep within the aforementioned daily demand area).

Under normal circumstances, we would usually enter the market here without the need for confirmation. The reason we say ‘usually’ is simply because this area of demand, even though it is beautifully located in the higher-timeframe picture, has been visited (14/01/15) already, meaning demand i.e. buy orders may have already been weakened. So as things stand, we are going to be watching the lower timeframe action today within this area of 4hr demand for a confirmed entry long. Assuming we find one, we’ll be looking to target 117.00, and potentially, given enough time and effort from the buyers, the 4hr supply area above at 117.93-117.69.

Current buy/sell levels:

• Buy orders: watching for lower-timeframe confirmation within 4hr demand at 115.55-116.06 (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

​USD/CAD:

Weekly Timeframe: The weekly timeframe is currently showing price trading above a weekly swap level coming in at 1.1870. As a result, this could open the doors to much higher prices in the future. Let’s see what the lower timeframes have to say about this.

Daily Timeframe: The rebound seen from just below the daily swap level at 1.2022 on Wednesday saw the market violently sell off yesterday past the aforementioned weekly swap level into a daily decision-point demand area seen at 1.1795-1.1834. There were clearly active buyers here as price rallied around 148 pips forming a nice-looking buying tail in the process.

4hr Timeframe: Yesterday’s descent saw the 1.1800 level prove itself once more as price rebounded strongly. This in turn saw price break above 1.1900 forcing the market to trade just below 1.2000 once again.

With respect to trading this pair, our team came to a general consensus yesterday that no long trades will be initiated until price convincingly breaks above 1.2000. This level, along with the daily swap level seen 22 pips above remains too strong of a resistive barrier to even consider buying this pair at the moment.

Selling the USD/CAD however is interesting, and as far as we can see, the sellers have two options here:

• Wait for price to attack 1.2000 once again, and then begin watching for lower timeframe selling confirmation.
• Enter with a pending sell order around the 1.1995 mark, and place your stop ABOVE the aforementioned daily swap level around the 1.2030 mark.

We favor the former, and as such, all eyes will be on the 1.2000 handle today and possibly into next week.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: Watching for lower-timeframe confirmation around 1.2000 (Predicative stop-loss orders seen at: dependent on where one confirms this level).

DAX 30:

Weekly Timeframe: The weekly timeframe shows that the rebound seen from the weekly decision-point demand area at 9126-9467 has recently extended higher towards the 10048 level. This is all very well and good, but will the buyers have the strength to break the10094 overall high looming just above?

Daily Timeframe: Similar to the weekly timeframe, the daily timeframe shows that price spiked above a daily resistance zone coming in at 10048-10007. We feel that this spike has very likely stopped out the majority of traders who attempted to sell around this area, and as such the path north is potentially clear for prices to challenge the 10094 high sometime today.

4hr Timeframe: Recent developments on the 4hr timeframe show that the buyers spring boarded themselves from a minor 4hr swap level at 9626 up to a 4hr swap level coming in at 10038, where at which point selling interest came into the market consequently forming a bearish pin-bar candle into the close.

For the buyers to attack and even possibly break above the10094 high, they will first need to take out any selling opposition around 10038. On top of that, they will also have to likely contend with strong competition from a 4hr supply area seen at 10094-10068.

With price so near to higher-timeframe resistance, buying this index is out of the question for us. With regards to selling, even though price is at higher-timeframe resistance, risk/reward parameters on the 4hr timeframe restrict us from entering short here with a 4hr swap area lurking just below at 9945-9917. Therefore, we feel it may be best to remain flat until more conducive price action is seen.

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).

DOW 30:

Weekly Timeframe: The weekly timeframe shows that for five consecutive weeks, price has been hovering above an ignored weekly Quasimodo level at 17135. In the event that this level fails, follow-through selling will likely be seen down towards a weekly support level coming in at 16051.

Daily Timeframe: After looking at the daily-timeframe picture, we feel it is very likely price will test the ignored weekly Quasimodo level sometime soon, due to the fact yesterday’s trading action saw the sellers breach 17362, which was in effect a key obstacle to a move towards this weekly level. It will be interesting to see what the 4hr timeframes has to say about this.

4hr Timeframe: Recent developments show:

• Price did indeed continue rallying north from the 4hr demand area at 17248-17344 towards the 4hr supply area at 17638-17537, as reported may happen in the previous analysis.
• Weakness is currently being displayed within the aforementioned 4hr demand area.

With all of the above taken into consideration, from the weekly down to the 4hr timeframe, everything is pointing to a possible move south towards a 4hr decision-point demand area at 17084-17150, which if you look to left, beautifully surrounds the aforementioned ignored weekly Quasimodo level. Therefore with this in mind, we have absolutely no interest in buying this index at the moment. While selling on the other hand will only be considered if price breaks below the aforementioned 4hr demand area and successfully retests the area as resistance. In the event that the above does take place; a take-profit target will be set at 17159.

On a side note, assuming that we take full profits here, we’ll then switch our attention to begin looking for long opportunities since we’d then be trading around heavy-weight demand (see above – weekly), as per the red arrows.

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: The weekly timeframe shows that Gold has pushed above a weekly supply area coming in at 1255.2-1226.1. This move has potentially cleared the path north up to a drop-base-drop weekly supply area seen at 1296.3-1269.3.

Daily Timeframe: The daily timeframe on the other hand shows that the recent break of weekly supply (see above) has subsequently forced the market into a daily supply area at 1277.1-1261.6 (located just below the aforementioned drop-base-drop weekly supply area).

4hr Timeframe: For anyone who follows our analysis on a regular basis, you may recall us mentioning that we had a pending buy order (1224.3) set just above a 4hr decision-point demand area at 1217.3-1223.4. As we can all see, price never filled this order, which was unfortunate since a nice rally was seen.

This is how we see the Gold market at the moment, the weekly chart currently shows a little ‘wiggle’ room to move north, while the daily timeframe is currently in fresh supply (see above). The 4hr timeframe as you can see is also in supply at 1271.6-1266.7 (located just within the aforementioned daily supply area). Therefore, with the above taken into consideration, buying is something we would not be comfortable with at the moment. Selling on the other hand may also be a little risky from a risk/reward perspective, as selling at current prices would leave little room for profit with a 4hr swap level looming just below at 1257.1.

In our opinion, opting to stand on the side lines here may be the best path to take, at least until the London markets open later on today, where at which point we’ll reassess Gold’s position.

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).

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