Friday 23rd January: Daily technical outlook and review.

EUR/USD:

Weekly Timeframe: The weekly timeframe shows that the Euro continued on its relentless march south, as the ECB unveils quantitative easing measures for the Eurozone. This move has forced the Euro below a major weekly demand area at 1.1373-1.1617, and as such likely opened the gates for prices to challenge a weekly Quasimodo support level coming in at 1.1109.

Daily Timeframe: Yesterday’s trading action reveals that after three days of rather frustrating sideways movement, prices eventually broke out south, consequently engulfing a daily demand area seen at 1.1443-1.1533 in the process. This will likely set the stage for a further decline in value down towards a small daily decision-point demand area seen at 1.1225-1.1283.

4hr Timeframe: The 4hr timeframe shows that the buyers and sellers continued to range between a 4hr support area at 1.1530-1.1546, and a 4hr supply area at 1.1647-1.1625 ahead of the ECB’s press conference yesterday. Once the meeting got under way, the Euro sold off and consumed not only the 1.1500 handle, but also 1.1400 as well.

Prices closing below 1.1400 would likely suggest a more bearish bias going into today and possibly next week. With that being said, we are now closely watching prices for a retest of 1.1400, as this could potentially be a nice location to sell, targeting 1.1300 (floating just above the aforementioned small daily decision-point demand area). Selling at 1.1400 with a pending order is a risky trade in our book. A more conservative approach would be to wait for a confirming price action on the lower timeframes, as psychological barriers such as these are sometimes victim to deep tests at times.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: watching for confirmation around the 1.1400 region (Predicative stop-loss orders seen at: dependent on where one confirms this level).

GBP/USD:

Weekly Timeframe: Very similar to the EUR/USD, the GBP/USD has also seen a decline in value which as a result forced this market deeper into a major weekly demand area coming in at 1.4812-1.5097.

Daily Timeframe: The daily timeframe shows that the GBP is ‘hanging on by a thread’ within the daily Quasimodo support area seen at 1.5007-1.5097. We firmly believe this area will be engulfed later on today, and as such this could pave the way south towards a major daily demand area visible at 1.4812-1.4949. This area of demand is particularly significant for the simple reason that it was the origin of a year-long uptrend beginning on the 10/07/13.

4hr Timeframe: Recent developments on the 4hr timeframe shows price breaking below a 4hr Quasimodo support area at 1.5026-1.5060, which is located very deep within the aforementioned daily Quasimodo support area. This has likely cleared the path south for prices to test the psychological threshold 1.5000. This major number could provide a nice base for prices to fake below the daily Quasimodo support area.

With the above taken into consideration, our team has come to a general consensus that 1.5000 could provide a ‘bounce trade’ at the very least, considering price is trading deep within a major weekly demand area at the moment (see above). Admittedly, buying the GBP here against the overall trend is a risk, which is why we are going to be watching the 30-minute timeframe for confirming bullish price action before even considering risking our money. On a side note, there’s also a 4hr ignored supply area lurking just below at 1.4979-1.4935, located just within the major daily demand area mentioned above at 1.4812-1.4949 – so do be prepared for some sort of fakeout below 1.5000 to be seen!

Current buy/sell levels:

• Buy orders: Watching for lower-timeframe confirmation around the 1.5000 area (Predicative stop-loss orders are seen at: dependent on where one confirms this level).
• Sell orders: Flat (Predicative stop-loss orders are seen at: N/A).

AUD/USD:

Weekly Timeframe: The weekly timeframe shows selling coming into the market around the underside of a recently broken descending channel (limits can be found at 0.9556 – 21/10/13 … 0.8846 – 05/08/13). This has likely caused panic among traders who bought within the weekly demand area at 0.8064-0.8460, potentially adding fuel to this selloff.

Daily Timeframe: The daily-timeframe picture reveals that the buyers and sellers are currently battling for position within a small daily demand area seen at 0.8031-0.8072.

4hr Timeframe: Recent developments on the 4hr timeframe showed just how fantastic ignored Quasimodo levels can be! Price took out the remaining buyers around 4hr demand at 0.8067-0.8091, and then reversed and attacked a 4hr ignored Quasimodo level at 0.8126, where a which point the market sold off, and is currently heading towards a 4hr Quasimodo support level at 0.8034. This level is effectively the last line of defense for the aforementioned daily demand area.

Entering long from this level around the 0.8035 mark is valid in our opinion, however with the weakness being seen on the weekly timeframe at the moment, lower-timeframe confirmation is most definitely recommended here. In the event that this level fails to hold, we could potentially see another round of selling down towards the psychological monster 0.8000 which in all likelihood will see a reaction.

Current buy/sell levels:

• Buy orders: 0.8035 [Tentative] (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: The USD/JPY pair continues to hover just above a major weekly swap level coming in at 115.50.

Daily Timeframe: The daily timeframe picture reveals that the upward momentum seen from the daily demand area at 115.55-116.38 may be diminishing, as price begins to stall just below a daily supply area seen at 119.95-119.14.

4hr Timeframe: Recent movements on the 4hr timeframe show that price did indeed see a reaction around the 118.00 region consequently sending prices back down towards the 4hr demand area at 116.91-117.22. We were unfortunately unable to catch this move on the lower timeframes – well done to anyone that did! The market clearly likes this aforementioned 4hr demand area as price was seen rebounding strongly from here, taking out the118.00 handle and pushing into a weak-looking 4hr supply area coming in at 118.84-118.52.

With the weekly timeframe showing price hovering above major support, and the daily timeframe indicating that there is room to move north, we are naturally expecting the current 4hr supply area to be consumed and 119.00 to be tested. 119.00 could be a nice area to look for a ‘bounce trade’ as we would then be trading just below the aforementioned daily supply area. In addition to this, notice that just above 119.00 we have a nice-looking fresh 4hr ‘sell zone’ at 119.31-119.12. Pro money will likely see this as an opportunity to fake above 119.00 into this supply area, one can only imagine the amount of buy stops lurking just above this number. Dependent on your style of trading (and if price reaches 119.00 of course), we intend to wait for lower-timeframe selling confirmation around the 119.05 mark, as we mustn’t forget where we are located on the weekly chart! (See above).

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: 119.05 [Tentative] (Predicative stop-loss orders seen at: 119.38).

USD/CAD:

Weekly Timeframe: The weekly timeframe shows the buyers recently conquered yet another key weekly level 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 reveals that price extended higher into a daily supply area coming in at 1.2504-1.2385. Could this area be enough to temporarily simmer down recent buying?

4hr Timeframe: In comparison with the past few days trading, the USD/CAD pair has recently been quiet. We were initially watching the 1.2300 handle for a reaction but as you can all see this level has yet to be visited. At the time of writing, the buyers and sellers appear to be clashing around the 1.2400 handle. A convincing break above here would likely prompt a retest, which is something we’d be interested in taking part in. Furthermore, assuming that 1.2400 holds as support, this could potentially be ‘game over’ for the aforementioned daily supply area, as let’s not forget what the weekly timeframe is telling us (see above).

Therefore with the above in mind, we have little interest in trying to short this market, especially with the strong buying being seen at the moment. Buying the retest of 1.2400 as already mentioned is something we’re interested in. As usual, lower-timeframe confirmation will be required here, owing to the fact that psychological levels such as these tend to fakeout regularly before trading in your desired direction.

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).

DAX 30:

Weekly Timeframe: Last week shows that the rebound seen from the weekly decision-point demand area at 9126-9467 has recently extended higher and closed above a weekly resistance level seen at 10048. Providing that the buyers can hold out above 10048, we see very little reason why the DAX cannot continue higher.

Daily Timeframe: The daily timeframe shows that after three days of rather frustrating sideways action, the DAX index saw a further increase in value trading as high as 10545. This volatility was very likely fuelled by the ECB press conference held yesterday afternoon.

4hr Timeframe: The recent movements seen on the DAX forced prices above the upper limit of an ascending channel (9126 – 17/11/14, 10084 – 04/12/14), which as a result formed a nice-looking 4hr decision-point demand area coming in at 10228-10302. With the recent buying pressure being seen over the past two weeks, we feel that this market may be overstretched at the moment. As such, we believe a retracement may be in store, if so, price could very well decline down towards the source of the break – the aforementioned 4hr decision-point demand area. This area likely contains unfilled buy orders, and as such (when/if the time comes) we plan to watch for confirmed buying entries on the lower timeframes around the 10317 point.

Current buy/sell levels:

• Buy orders: 10317 [Tentative] (Predicative stop-loss orders seen at: 10213).
• 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. 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: Yesterday was clearly a fantastic day for anyone who entered long on the DOW with price moving a respectable 252 points (figure includes pre/after-market hours). Assuming that the buyers can continue with this tempo into today’s sessions, prices could potentially hit 17896, a key daily swap level.

4hr Timeframe: The 4hr timeframe shows that the recent buying pressure took out both the 4hr supply area seen at 17638-17537, and a 4hr decision-point supply level seen at 17779. This move has forced the buyers and sellers to battle for position around a 4hr down trendline formed from the high 18099. Assuming that the selling opposition is weak here, the path north will then be very likely clear up towards a partially consumed 4hr decision-point supply area coming in at 17944-17885 (conveniently located around the aforementioned daily swap level).

With respect to the above, we have absolutely no interest whatsoever in selling the DOW at the moment. We are however interested in entering long on any retest seen of 17779, with 17878 in mind as a first take-profit target. If price does indeed hit 17779, we’ll be watching for confirmation on the 5/15 minute timeframes. Confirmation is a must for us here since we do not see any logical areas to place a stop-loss order.

Current buy/sell levels:

• Buy orders: intending to watch for lower-timeframe confirmation around 17779 (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

XAU/USD (Gold):

Weekly Timeframe: The weekly timeframe shows that Gold has broken above a weekly supply area at 1296.3-1269.3, which as a result leaves the weekly supply area seen at 1391.9-1328.0 clearly in the limelight for the time being.

Daily Timeframe: Yesterday’s trading action saw prices rebound strongly off of a small, yet clearly respected daily decision-point demand area coming in at 1271.9-1281.3. Providing that the buyers continue to show enthusiasm here, we feel there is a very good chance prices could visit a fresh daily supply area seen at 1319.2-1308.6.

4hr Timeframe: For anyone who read our previous report on Gold, you may recall us mentioning that we were long from 1287.51. This as you can see was a failed trade, price faked south towards the 4hr swap level seen below at 1280.3 and subsequently moved in our desired direction!

The rally higher forced the market above the 1304.9 high, and as a result likely stopped the majority of traders attempting to fade here. With the sellers taken out, and breakout buyers filled, prices will likely continue north up towards a small 4hr supply area seen at 1315.0-1311.2 (located within the aforementioned daily supply area).

With the above taken into account, we see very little worth trading on Gold for the time being. As such, we are going 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).

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