Friday 30th January: Daily technical outlook and review.

EUR/USD:

Weekly Timeframe: The trading picture on the weekly timeframe remains relatively unchanged. Buying interest is still being seen off of the weekly Quasimodo support level at 1.1109, while to the upside, potential resistance sits around a nice-looking weekly supply area seen at 1.1678-1.1458.

Daily Timeframe: The daily timeframe on the other hand shows that the market is presently trading below a daily swap level (resistance) coming in at 1.1378. This level remains a key obstacle to a move towards a daily decision-point supply area at 1.1678-1.1540, which is coincidentally located deep within the aforementioned weekly supply area.

4hr Timeframe: Recent developments on the 4hr timeframe show that the EUR/USD appears to be capped between a minor 4hr decision-point supply area seen at 1.1381-1.1349 (surrounds the aforementioned daily swap level) and a 4hr decision-point demand area coming in at 1.1222-1.1253. From a technical standpoint, this is how we see the Euro at present – the weekly chart shows potential north, while the daily chart is suggesting buying may not be such a good idea at the moment (see above).

Our team has come to a general consensus that entering long from the aforementioned 4hr decision-point demand area does not offer enough risk/reward for us to consider trading. A far more conservative approach for longs would be to wait for prices to close above a minor 4hr swap level seen at 1.1458, since this will not only clear the sellers from the aforementioned daily swap level resistance barrier, but also free the path north up to a combined 4hr supply/Quasimodo resistance area at 1.1678-1.1589/1.1637. With regards to selling, this is something we have absolutely no interest in doing until price breaks below the aforementioned weekly Quasimodo support level.

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: The weekly timeframe shows that buying pressure appears to be diminishing within the weekly demand area seen at 1.4812-1.5097 at the moment. It will be interesting to see what the lower timeframes have to say about this…

Daily Timeframe: From a technical perspective, the reason price may be showing weakness within the aforementioned weekly demand area likely stems from a minor daily supply area seen at 1.5211-1.5140. As such, this recent momentum south has consequently forced prices to hit a minor daily demand area visible at 1.4950-1.5034 (located within the aforementioned weekly demand area). Could this be enough for the buyers to mount a comeback?

4hr Timeframe: The 4hr timeframe shows that price recently broke below a 4hr decision-point demand area seen at 1.5058-1.5103, which as a result saw the market hit, and react off of a 4hr decision-point demand area at 1.4977-1.5016. This area is particularly significant to us since it encapsulates a rather large round number – 1.5000.

With the above taken into consideration, we agree that buying the GBP does seem attractive at the moment. However, with near-term 4hr supply coming in from not only the recently broken 4hr decision-point demand area at 1.5058-1.5103, but also a small, yet likely powerful 4hr decision-point supply area seen just above it at 1.5161-1.5130, buying from our camp will not likely be agreed upon just yet. So, with this in mind, opting to stand on the side lines here is certainly the best path to take for the time being.

Current buy/sell levels:

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

AUD/USD:

Weekly Timeframe: The weekly timeframe shows that the buyers have recently come under attack from within the weekly demand area seen at 0.7699-0.7974. Should this area be taken out, price will almost immediately be trading into a strong-looking weekly demand area coming in at 0.7449-0.7678.

Daily Timeframe: Consequent to recent events, price was drove deep into a daily Quasimodo support area coming in at 0.7699-0.7834, which in our opinion is the last line of defense for the buyers within the aforementioned weekly demand area; it will be interesting to see what the 4hr timeframe shows…

4hr Timeframe: Unfortunately, we are unable to see what the 4hr price structure was like in the past as our present data feed does not extend that far back in history, so for the time being we’ll work with what we have for now.

The fresh selling reveals that price broke below and retested 0.7900, and then continued south towards 0.7800 which gave way with little to no fight. A small 4hr decision-point supply area was formed on the break of 0.7800 at 0.7798-0.7772; this area of supply could potentially hold the market lower, and if so, we believe this may be the end of the road for the weekly demand area mentioned above at 0.7699-0.7974. With all the above in mind, we have no interest whatsoever in buying this pair until price convincingly breaks above the aforementioned 4hr decision-point supply area. Selling on the other hand is not really something we’re comfortable with, but we will say that we’re going to be keeping a close eye on lower-timeframe price action around the 0.7766, if something tempting crops up, we’ll trade it with a small position.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: 0.7766 [Tentative] (Predicative stop-loss orders seen at: 0.7805).

USD/JPY:

(Due to the little movement seen on this pair, our analysis remains unchanged)

Weekly Timeframe: The USD/JPY pair really seems to have stagnated over the past two weeks as price continues to meander within last week’s range (118.85/116.91). From a long-term perspective, our bias remains north 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.

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 have been really stretching their legs lately, as price has been seen steaming towards the weekly Quasimodo resistance level coming in at 1.2765.

Daily Timeframe: Recent movements on the USD/CAD show that price is now trading within a daily supply area sitting at 1.2713-1.2595. This area remains a key obstacle to a move towards the aforementioned major weekly Quasimodo resistance level.

4hr Timeframe: For anyone who read out last report on the Loonie, you may recall us mentioning that if price retested the 1.2500 handle, we’d be interested in buying around this region. But as you can see, price missed this line by a few pips and as such no trade was initiated.

The recent advance caused price to strongly close above 1.2600, and in turn formed a tight 4hr decision-point demand area at 1.2510-1.2533. At this point in time, all eyes are on current price around 1.2600 for any sign of bullish activity, where additional support from a 4hr minor trendline level (prior resistance) is also seen (taken from the high 1.2393 on 21/01/15).

In the event that lower-timeframe buying strength is seen here, this will not only give us the opportunity to buy, but could also likely mean ‘game over’ for the aforementioned daily supply area. Assuming that we find an entry long, the overall target we have in mind is 1.2742, which is seen just below the aforementioned weekly Quasimodo resistance level.

Current buy/sell levels:

• Buy orders: currently watching for lower-timeframe confirmation around 1.2600 (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

DAX 30:

Weekly Timeframe: The weekly timeframe shows that price continued to rally following a recent close above the long-term weekly trendline resistance level (formed from the high 7347 – 14/02/11). It will be interesting to see what the lower timeframes have to offer.

Daily Timeframe: Yesterday’s trading action shows that the market confirmed support from the aforementioned weekly trendline, as price retested it to perfection! Provided that the buyers can push above Monday’s high at 10853, we see very little reason why the DAX cannot continue progressing to new highs.

4hr Timeframe: Recent events on the 4hr timeframe show that the spike (marked with a red arrow) seen below the 4hr decision-point demand area (10584-10658) at 10551 was clearly a fakeout… Well-funded traders very likely used the sell stops as liquidity to buy into, thus pushing the market north towards a small 4hr supply area coming in at 10853-10823. A break above this area will likely suggest a more bullish bias going forward.

Therefore, to sum up, we have absolutely no interest in buying this index until price closes above this 4hr area of supply. On the subject of selling, we would not be comfortable shorting here with potential support looming below at 10731, as the risk/reward would not exactly be in our favor. So unfortunately we’ll have to play the waiting game 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).

DOW 30:

Weekly Timeframe: The weekly timeframe shows that for seven consecutive weeks price has been teasing the ignored weekly Quasimodo level at 17135. Provided that the buyers can continue to hold the market above this barrier, our overall bias will remain long.

Daily Timeframe: Yesterday saw the DOW beautifully rebound from a daily demand area coming in at 17032-17186, which if you look to the left at the high 17135, you’ll see price literally reacted to-the-pip at the aforementioned ignored weekly Quasimodo level.

4hr Timeframe: For anyone who read our last report on the DOW, you would likely remember us mentioning to watch for buying confirmation around the 4hr decision-point demand area seen at 17084-17150 (located deep within the aforementioned daily demand area). As you can see, price did indeed react to this area, and as such we found a picture-perfect buy entry on the 30 minute timeframe. We entered long after the fakeout below the low 17149 was seen into the ignored weekly Quasimodo level (see above) at 17130, and were filled at 17182 around 10:30am GMT time. Our first take-profit target has already been hit at 17254, now we’re just watching how price action behaves around the small 4hr Quasimodo resistance level at 17500. Ultimately, a break and retest of this level would be fantastic, as we have our final target set around the 4hr supply area seen above at 17698-17663.

Current buy/sell levels:

• Buy orders: 17159 [Live] (Predicative stop-loss orders seen at: presently set at breakeven).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

XAU/USD (Gold):

Weekly Timeframe: The weekly timeframe currently shows that the market is heading southbound. In the event that the sellers continue with this tempo, we see very little stopping prices from hitting a weekly swap level coming in at 1240.2.

Daily Timeframe: The recent selling has consequently engulfed a daily decision-point demand area at 1271.9-1281.3, which opened the gates for prices to challenge a small ignored daily Quasimodo level seen at 1249.4 (located just above the aforementioned weekly swap level).

4hr Timeframe: The 4hr timeframe shows that with price engulfing the aforementioned daily decision-point demand area, it also took out a smaller 4hr demand area that resided inside at 1271.9-1277.1.

At the time of writing, Gold is trading at an interesting place. Notice how price is currently faking below the low 1254.8 (shown with green arrows); this is very likely consumption taking place here. To put it another way, this is traders potentially getting stopped out who were unaware that an ignored daily Quasimodo level lurked just below. And as such, we still believe price has further to drop.

The green shaded area represents the zone between the two higher-timeframe levels (see above), which from where we’re standing is a fantastic area to be looking for buying opportunities today and possibly into next week. Once/if price reaches here; we intend to watch the 15/30 minute timeframe action to see if the buyers have the strength to consume opposing supply which will in effect be our cue to begin preparing to enter long.

Current buy/sell levels:

• Buy orders: watch for lower-timeframe confirmation between 1240.20/1249.4 (Predicative stop-loss orders seen at: 1239.49).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

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