Monday 12th January: Weekly technical outlook and review (Japanese Bank holiday today).

EUR/USD:

Weekly Timeframe: The recently closed weekly candle shows that the Euro saw a further decline in value last week, subsequently breaking below a major weekly demand area at 1.1875-1.2095, and forcing the market down towards a weekly Quasimodo support level coming in at 1.1758 (weekly trendline confluence – 23/10/2000 – 0.8230) . Buyers were not completely dormant in this move, a rebound was seen, but at this point in time it’s very difficult to tell if it is indeed genuine buying interest, or simply short-covering.

Daily Timeframe: The daily timeframe shows that a two-bar reversal pattern was printed during Thursday and Friday’s trading sessions around a daily demand area coming in at 1.1776-1.1838 (located just above the aforementioned weekly Quasimodo support level). From a technical standpoint, we feel there is a good chance higher prices could be seen this week up to 1.2041. It will be interesting to see what the 4hr timeframe has to say about this.

4hr Timeframe: The 4hr timeframe saw price oscillating around the 1.1800 handle before spiking south towards the aforementioned weekly Quasimodo support level for the second time. This promptly saw active buying enter the market pushing prices north, closing the week (1.1840) just below a partially consumed 4hr supply area at 1.1895-1.1856.

In our opinion, buying the Euro now would be considered a risky trade to take on. Granted, we do have a higher-timeframe weekly support with a nice-looking two-bar reversal pattern seen on the daily timeframe, but buying into 4hr supply would effectively go against our conservative nature, and in addition to this, we mustn’t forget that the Euro has been showing clear weakness over the past 6-7 months.

Therefore, no long trades will be executed until price consumes this area of 4hr supply, and with a bit of luck close above the 1.1900 handle in the process. As a consequence, this will likely see a prompt retest forcing the market northbound toward the humongous 1.2000 level. The close above 1.1900 will be our cue to begin preparing to enter long on any retest offered. The reason we believe prices can rally up to 1.2000 from 1.1900 is simply because to the left we see clear supply consumption wicks marked with green arrows at 1.1895/1.1957, effectively clearing the path north.

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: Very similar to the EUR/USD, the recently closed weekly candle saw the British pound take another whipping last week, as prices were driven southbound into a weekly demand area coming in at 1.4812-1.5097. Could this area of demand, which boasts trendline confluence from the low 1.4225 (17/05/2010) allow the buyers back into play this week?

4hr Timeframe: The 4hr timeframe shows that price reacted beautifully off of a small 4hr support area coming in at 1.5026-1.5049 (located deep within the aforementioned daily Quasimodo support area). This consequently saw the bulls take out the 1.5100 handle, and promptly retest it as support a few hours before the market closed for the week (1.5155).

Light volume is expected to be seen as very little high-impacting news is scheduled for today. Be that as it may, assuming that the buyers took the retest of 1.5100 as positive, further buying will likely take place up to at least 1.5200. In the event that the GBP closes above here, this will likely be our cue to begin looking for retesting opportunities to enter long up to a 4hr supply area coming in at 1.5272-1.5255 (lowest zone within a stacked supply formation).

We know that the current fundamental bias is clearly south on the GBP at the moment, nonetheless, we simply cannot ignore the fact that the higher-timeframe technical picture is indicating to buy at the moment. So, therefore, from a technical standpoint – here is something to keep in mind:

• The GBP/USD is currently trading off of a weekly demand area with trendline confluence (see above).
• While the daily timeframe is also showing promise – a bullish pin bar candle off of a daily demand area which saw follow-through buying seen on Friday (see above).

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: The recently closed weekly candle shows that last week saw price push below a major weekly demand area at 0.8064-0.8460 last week. This saw the market rally with price closing near its highs (0.8207) at 0.8197. From where we’re standing, it’s too early to tell if this is indeed a fully-fledged fakeout in motion here. Let’s take a look on the lower timeframes to see what we can find.

Daily Timeframe: Friday saw the Aussie continue to extend higher from the daily pin-bar candle formed on Wednesday. This consequently saw the market drive prices deep into a daily supply area coming in at 0.8214-0.8160. Assuming that this area of supply is taken out, this will likely tell us two things. One, the path is likely clear for price to test a daily swap area seen at 0.8314-0.8405, and two, it will also likely confirm that the spike below the aforementioned weekly demand area was indeed a fakeout.

4hr Timeframe: The recent ascent on the AUD saw price consequently taking out a minor 4hr swap area seen at 0.8161-0.8158, which as a result saw additional buying up to 0.8200.

0.8200 (seen deep within the aforementioned daily supply area) is in our opinion a critical juncture for this pair. A convincing break above here could well see a prompt retest forcing the market up to at least 0.8300, and possibly, given enough time, the 4hr supply area seen just above it at 0.8374-0.8326 (located relatively deep within the aforementioned daily swap area). The reason why we believe price can rally this high is simply because there’s very little active supply left above 0.8200. Take a look at the very obvious supply consumption wicks seen marked with green arrows at 0.8273/0.8235. Nevertheless, in the event that the sellers begin to show strength around the 0.8200 handle, a decline in value will likely be seen down towards the aforementioned minor 4hr swap area.

Therefore with all of the above taken into consideration, we’ll be watching price action closely at the open. If price breaks above 0.8200, buying the retest is something we’re very interested in doing for reasons stated above. Conversely, selling with lower-timeframe confirmation around 0.8200 and targeting 0.8165 is also something we’d be open to for a quick profit.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: Watching for confirmed shorting opportunities around 0.8200 (Predicative stop-loss orders seen at: dependent on where one confirms this level).

USD/JPY:

Weekly Timeframe: From a technical perspective, the weekly timeframe shows very little change. Price still remains to be trading between a weekly Quasimodo resistance level coming in at 122.18, and a major weekly swap level seen at 115.50.

Daily Timeframe: Last week saw rather cramped trading conditions as the buyers and sellers battled for position between a daily swap area coming in at 119.19-118.04, and a small daily supply area seen above at 120.63-119.88 (lowest zone within a stacked supply formation).

4hr Timeframe: The 4hr timeframe shows some very interesting price action. As we can all see, price is still currently seen trading within the confines of a 4hr descending channel (limits can be found at: 120.73 – 02/01/15…118.85 – 30/12/14) at the moment.

The selloff seen on Friday saw the market hit what we like to call ‘fresh unfilled buy orders’ seen marked with a green arrow around the 118.38 mark. This will likely cause the market to rally higher today up to around 119.00, which in our opinion is a nice place to look for confirmed selling opportunities since it lines up nicely with the upper limits of the 4hr descending channel (tentative sell orders are seen just below at 118.97). Assuming that the sellers can hold the market lower here, we then expect to see price decline down towards 118.00, where a rebound could well be seen. However, with (what we like to call) a ‘hot point’ (essentially meaning a highly confluent area) lurking just below (for details, see numbers 1-5), we feel there’s a good chance that 118.00 will be breached and price will trade into this supportive area.

We are going to be setting a pending buy order at 117.35 within this ‘hot point’ with a stop just below at 116.73 for the following reasons:

• Lower-limit support from the aforementioned descending channel.
• Fresh 4hr decision-point demand area seen at 116.80-117.30.
• 4hr Quasimodo support level at 117.43.
• Psychological number 117.00
• Trendline support from the low 113.15 – 04/11/14.

Current buy/sell levels:

• Buy orders: 117.35 (Predicative stop-loss orders seen at: 116.73).
• Sell orders: 118.97 [Tentative (Predicative stop-loss orders seen at: dependent on where one confirms this level).

USD/CAD:

Weekly Timeframe: The U.S Dollar continued to strengthen against the Canadian Dollar last week, which saw the market advance to a fresh high of 1.1888. As a result, price broke above a major weekly supply area coming in at 1.1806-1.1473, and subsequently rallied towards an oncoming weekly swap level seen at 1.1893, forcing the market to close at 1.1855.

Daily Timeframe: It was mentioned in the previous analysis that we saw a successful retest of 1.1800 on Thursday, and believed this was a good sign that higher prices up to the aforementioned weekly swap level would follow. As we can all see price did indeed rally higher, and with that price is now firmly capped between this weekly swap level and 1.1800. It will be interesting to see what the 4hr timeframe picture shows.

4hr Timeframe: For anyone who follows our analysis on a regular basis, you may recall us mentioning that we had a live buy position in the market at 1.18066, and that we were ultimately targeting the aforementioned weekly swap level. Things were looking great, until the NFP result spiked south consequently stopping us out at breakeven, and then rallying straight to our target!

Once buying pressure dried up, price began selling off into 1.1840, which was able to hold the market higher into the close. In the event that the buyers can hold out above here this week, we may see price challenge the aforementioned weekly swap/round-number level at 1.1900 this week sometime.

With all of the above taken into consideration, we have no interest in buying this market until 1.1900 is taken out, and likewise, we do not see any worthwhile opportunities to sell the USD at the moment. At times like this, we prefer to take the safest position there is – Flat!

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: For the second time in four weeks, the DAX finished the week defending a weekly decision-point demand area seen at 9126-9467. Assuming that this area of demand holds, we feel that there’s a good chance price may attack the 10048 level once more either this week or the next.

Daily Timeframe: Friday saw the DAX sell off from a major daily swap level coming in at 9790, forcing the market to close at 9671. In the event that the sellers continue with this tempo, prices will likely test a minor area of daily demand coming in at 9379-9459 (located just within the aforementioned weekly decision-point demand area), which additionally boasts a nice-looking daily trendline support barrier at 9126/9233.

4hr Timeframe: The 4hr timeframe shows that the buyers did actually attempt to hold above 9790, but as we can all see, the sellers were clearly too overwhelming for the buyers on this occasion.

Other than a small 4hr minor swap level seen at 9626, price shows very little stopping the market from moving south towards the aforementioned minor daily demand area (as per the blue arrows), which displays additional 4hr trendline support from the low 8817 (23/10/14).

In the event that the 9626 level is consumed, and further selling is indeed seen, we’ll be watching for lower-timeframe confirmed buying opportunities around the minor daily demand area – specifically the 9469 mark. Dependent on how price approaches this area of demand, our target will be ultimately set just below the 9790 daily swap level.

Current buy/sell levels:

• Buy orders: 9469 [Tentative] (Predicative stop-loss orders seen at: 9371).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

DOW 30:

Weekly Timeframe: Ultimately, the DOW index did not see much of change last week (open/close -17789/17720), the sellers, however did attempt to trade lower, but consequently found 17248 (seen a little above the ignored weekly Quasimodo level at 17135) too strong to overcome, and as a result a nice-looking buying tail formed in the process.

Daily Timeframe: The daily timeframe shows that after two days of consecutive higher highs (Wednesday/Thursday), Friday saw the buyers seemingly run out of steam around the 17896 mark. This daily swap level taken from the left shoulder that formed on 21/11/2014 was clearly enough to allow the sellers back into play. Form a technical standpoint; we do not see much stopping the sellers from continuing south this week back down towards the daily swap level visible at 17362. Let’s see what the 4hr timeframe has to say about this.

4hr Timeframe: The 4hr timeframe shows that for the DOW to continue selling off, buying opposition around a 4hr decision-point demand area at 17675-17719 would need to be consumed beforehand.

Let’s quickly recap here, so that we’re all on the same page. A buying tail was seen on the weekly timeframe, while the daily timeframe shows that the sellers rebounded off of a daily swap level, and indicates there’s still room to move further south (see above for levels). Therefore, we seem to have conflicting signals here, and as such buying or selling on the 4hr timeframe will only be done so with strict trade management, and with clear profit targets.

Once the market opens today, we intend to watch for lower-timeframe buying confirmation around the 4hr decision-point demand area mentioned above at 17675-17719. Assuming that we find an entry long here, we intend to take full profits around a 4hr decision-point supply area seen at 17944-17885, which also corresponds nicely with a down trendline from the high 18099 (26/12/14). Conversely, assuming that price pushes below this area of demand, we’d be interested in trading any confirmed retest targeting the 4hr swap area seen just below at 17573-17518.

Current buy/sell levels:

• Buy orders: Watching for lower-timeframe confirmation around the 4hr decision-point demand area at 17675-17719 (Predicative stop-loss orders seen at: 17668).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

XAU/USD (Gold):

Weekly Timeframe: The weekly timeframe shows that Gold increased in value last week from 1188.0 to 1222.6. As such, price is now trading below a weak-looking weekly supply area coming in at 1255.2-1226.1. The reason we believe this area to be weak is simply because this weekly supply area has already been visited on the 08/12/14 consequently weakening the supply i.e. sell orders here. What is more, notice that the first reaction did not form any new lower lows. This tells us that that Gold may want to trade higher.

Daily Timeframe: The daily timeframe shows that the reaction seen around the daily Quasimodo resistance level at 1221.1 on Tuesday did initially appear to display signs of selling strength. However, Friday’s trading action put a stop to this as price rallied and closed above this daily Quasimodo resistance level. As a result, this likely clears the path north for the buyers to attack a daily supply area coming in at 1238.1-1227.7 (located just within the aforementioned weekly supply area). It will be interesting to see what the 4hr timeframe shows.

4hr Timeframe: For those who follow our analysis on a regular basis, you may recall us mentioning that we were intending to watch for lower-timeframe buying confirmation around a 4hr decision-point demand area at 1201.5-1204.7 after the NFP numbers were released. Unfortunately, as you can see, there was very little chance for us to enter long with confirmation before price rallied higher.

All is not lost though. With the weekly timeframe depicting weakness within the aforementioned weekly supply area, and the daily timeframe indicating that there’s room to move north, we’re still confident higher prices are likely going to be seen this week.

The 4hr timeframe shows that price closed for the week at a very significant level in our view – 1222.9, the high formed on Tuesday. Why is this important? Well, as far as we can see, above 1222.9 is relatively clear of active supply up to a 4hr supply area coming in at 1244.5-1240.1 (located deep within the aforementioned weekly supply area). Check out the very obvious supply consumption wicks seen within the green arc shape at 1197.6/1231.8/1232.6.

Therefore, with all of the above taken into consideration, we have absolutely no interest in selling Gold at this point in time. Buying Gold however would be permitted if price convincingly breaks above 1222.9, this would effectively be our cue to look to trade any confirmed retest targeting 1239.6, just below the aforementioned 4hr supply area.

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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