Monday 19th January: Weekly technical outlook and review (U.S Bank holiday today)

EUR/USD:

Weekly Timeframe: Last week saw the EUR/USD continue on its relentless march south dropping a little over 290 pips. This consequently forced the market to push below a weekly Quasimodo support level at 1.1758, and test a major weekly demand area coming in at 1.1373-1.1617.

Daily Timeframe: The daily timeframe shows that Thursday and Friday’s trading sessions were the ‘real movers’ of last week’s action, collectively forcing the Euro 229 pips down towards a fresh daily demand area (part of a stacked demand formation) visible at 1.1443-1.1533 (located within the aforementioned weekly demand area).

4hr Timeframe: Recent developments on the 4hr timeframe show that selling interest came into the market around the 1.1647 high, just three pips below the 1.1650 round number. This subsequently forced the Euro below 1.1600 which as a result attracted further selling down towards 1.1500, at which point active buyers were seen buying (or short-covering) into the close (1.1557).

From a higher-timeframe perspective (see above), 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. Equally, any selling opportunities seen will also require lower-timeframe confirmation since we would effectively be selling into higher-timeframe opposition (see above).

With the above taken into consideration, we see potential selling opportunities around a small 4hr supply area at 1.1647-1.1625. The round number lurking just below at 1.1600 will likely contain enough buy stops from sellers attempting to fade to force prices north towards our sell zone. Therefore, we’ll be watching the 1.1620 mark for lower timeframe selling confirmation today and possibly into tomorrow. If a short entry is found, we feel that the best place for a stop-loss order (1.1658) is just above the 4hr supply area irrespective of where the area is confirmed on the lower timeframes.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: 1.1620 [Tentative] (Predicative stop-loss orders seen at: 1.1658).

GBP/USD:

Weekly Timeframe: In comparison to the EUR/USD weekly chart, the GBP/USD moved very little last week. The weekly timeframe currently shows that buying and selling is boxed between a weekly swap level at 1.5270, and a weekly demand area coming in at 1.4812-1.5097.This weekly demand area is particularly attractive as it also boasts trendline confluence from the low 1.4225 (17/05/10).

Daily Timeframe: The daily timeframe shows much the same as the weekly timeframe, only in a little more detail. Last week’s trading action took place between a daily Quasimodo support area at 1.5007-1.5097 (located just within the aforementioned weekly demand area), and the aforementioned weekly swap level. In the event that price breaks above this level sometime this week, further buying up to a daily swap level seen at 1.5433 could well be seen. A break the daily Quasimodo support area on the other hand would likely force the market to test a nice looking daily demand area coming in at 1.4812-1.4949, which is located extremely deep within the aforementioned weekly demand area.

4hr Timeframe: Recent developments on the 4hr timeframe show that price engulfed a small 4hr decision-point demand area at 1.5145-1.5171, which in turn saw the market sell off down towards 1.5100 and react bullishly into the close (1.5130).

With both the weekly and daily timeframes not offering us much in the way of future direction (see above), trading the 4hr timeframe without higher-timeframe confluence can be tricky and sometimes dangerous. That being the case, any buying or selling done on this pair today and into the week will NEED to have supporting lower-timeframe confirmation, until we are able to see some sort of directional move on the higher timeframes.

With regards to the 4hr timeframe, potentially reactive areas are seen at 1.5200 and 1.5100 as per the red arrows. For us though, this is by no means high probability, and we would need to see absolutely mouth-watering confirmation at these levels to tempt us to trade here.

Current buy/sell levels:

• Buy orders: 1.5100 [Tentative] (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: 1.5200 [Tentative] (Predicative stop-loss orders seen at: dependent on where one confirms this level).

AUD/USD:

Weekly Timeframe: Last week saw the AUD/USD pair move a mere 15 pips from open to close (0.8207/0.8222), consequently forming an indecision candle in the process. Price remains trading within a major weekly demand seen at 0.8064-0.8460, however, for prices to trade higher, the buyers must consume any potential selling opposition sitting around the underside of a recently broken descending channel (limits can be found at 0.9556 – 21/10/13 … 0.8846 – 05/08/13), and with enough effort from the buyers, a weekly swap area seen just above at 0.8314-0.8424.

Daily Timeframe: From Wednesday onwards the Aussie rallied nicely since hitting a small daily demand area coming in at 0.8031-0.8072. This consequently saw price climb above the 0.8214 highs suggesting a more bullish bias going into this week, at least up to the weekly swap area mentioned above at 0.8314-0.8424.Additionally, check out the two consumption wicks seen marked with red arrows at 0.8273/0.8297, this tells us that supply is likely already consumed and the path north is clear. It will be interesting to see what the 4hr timeframe shows.

4hr Timeframe: Recent developments on the 4hr timeframe show that the majority of sellers were very likely consumed last week around a 4hr supply area seen at 0.8273-0.8250. As a result, this has potentially cleared the path north up towards the 0.8300 level (lingering just below the aforementioned weekly swap area).

Even with the weekly timeframe showing potential resistance within weekly demand at the moment (see above), our bias, thanks to the daily timeframe providing direction, is long for the time being. We currently see two possible scenarios on the 4hr timeframe this week, each tradable in their own right:

• In the event that the buyers continue to hold out above 0.8200, we’d be interested in buying using lower-timeframe confirmation, with 0.8292 in mind for a target, seen just below 0.8300. The reason for requiring lower-timeframe confirmation here is simply because psychological levels such as these are often prone to fakeouts.
• Assuming that the 0.8200 level gives way and price declines down to a small 4hr swap level (0.8168) which boasts additional support from the recently-formed ascending channel (limits: 0.8251 [12/01/15] 0.8034 [07/01/15]), we would then consider entering long with lower-timeframe confirmation around the 0.8173 mark. A smaller position will be used here due to the fact that 0.8200 could effectively become troublesome resistance. A break above here however (assuming we find an entry north) would give us confidence to pyramid the position back to its normal trading limit. The target for this trade, assuming that the buyers can overcome 0.8200 would be the the same as above, 0.8292.

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) 0.8173 (Predicative stop-loss orders seen at: 0.8143).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

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