Monday 23rd February: Weekly technical outlook and review

EUR/USD:

Weekly Timeframe: Ever since we saw the market rebound from the weekly Quasimodo support level at 1.1109 (26/01/15), price has been seen hesitating below a weekly supply area coming in at 1.1678-1.1458. A break above this supply could very well clear the path north up to a major weekly swap level seen at 1.1758.

Daily Timeframe: Since the 12/02/15, the EUR/USD pair (as per the daily timeframe) has been seen consolidating between a small daily demand area visible at 1.1260-1.1318, and a daily swap level located at 1.1411. The 1.1411 barrier, in our opinion, remains a key obstacle to a move higher into the aforementioned weekly supply.

4hr Timeframe: Friday’s trading action saw the market break south from the week-long 4hr range at 1.1441/1.1336, which in turn saw price fake below a 4hr demand area at 1.1304-1.1318 into the 1.1278 4hr swap level (positioned deep within the small aforementioned daily demand area). Active buying was clearly present here as price rocketed back up to the daily swap level at 1.1411, which consequently saw two selling tails form into the close (1.1376).

Let’s just quickly recap here, so that we’re all on the same page… The weekly chart shows price is currently trading around the underside of weekly supply, while the daily chart is in a state of consolidation (see above) at the moment. So, where does this leave us on the 4hr timeframe? Well, a break above the aforementioned daily swap level this week would likely attract further buying towards a relatively fresh 4hr supply area at 1.1497-1.1462. Our team still has a pending sell order set just below this area at 1.1457, since this zone remains relatively fresh, and is located just within the limits of the aforementioned weekly supply area.

However, In the event that the sellers manage to hold the market below 1.1411, price may very well decline back down to 1.1278. It would be at this point (considering this level’s active history) we’d begin watching for lower timeframe buying confirmation around the 1.1282 mark for a quick bounce/scalp trade.

Current buy/sell orders:

• Buy orders: 1.1282 [Tentative] (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: 1.1457 (Predicative stop-loss orders seen at: 1.1503).

GBP/USD:

Weekly Timeframe: The weekly timeframe shows that the GBP/USD advanced to a fresh high of 1.5478 last week, which consequently drove price higher into a weekly swap area seen at 1.5426-1.5561. Nonetheless, there was clearly some selling opposition within this weekly area, as price closed lower at 1.5398.

Daily Timeframe: For the best part of last week, price was seen teasing a daily swap level seen at 1.5426, which if you remember from the weekly chart is effectively the lower limit of the aforementioned weekly swap area. In the event that price manages to close above this level, we feel that there is a good chance price will likely hit a nice-looking daily supply area at 1.5619-1.5548 (positioned just above the aforementioned weekly swap area).

4hr Timeframe: Recent developments on the 4hr timeframe show that the market sold off on Friday, but consequently found the 1.5351 level to be supportive enough to allow the buyers back into play.

Taking into account that both the weekly and daily timeframes are showing resistance (see above) at the moment, we are naturally more biased to a decline in value being seen this week. With that in mind, selling from the small 4hr decision-point supply area (formed from the recent sell off) at 1.5433-1.5411 is something our team will only consider if lower timeframe selling confirmation is also present. Assuming that we find an entry here today, our first take-profit target will be set around 1.5351, in the event that this level gives way, our final take-profit target will be set just above the 1.5300 handle. It would be here that our team would begin looking for longs, since price would then be positioned just above a weekly swap level coming in at 1.5270.

Current buy/sell orders:

• Buy orders: Flat (Predicative stop-loss orders are seen at: N/A).
• Sell orders: watching for lower timeframe confirmation around the 4hr decision-point supply area at 1.5433-1.5411 (Predicative stop-loss orders are seen at: 1.5438).

AUD/USD:

Weekly Timeframe: Overall, the AUD/USD pair still remains bullish in our opinion as last week saw price continue to trade above the weekly demand area coming in at 0.7449-0.7678. And with resistance not expected to come into the market until price reaches the 0.8064 hurdle, we feel that the Aussie has much higher to move yet. It will be interesting to see what the lower timeframes have to say about this…

Daily Timeframe: The daily picture shows that for the past three weeks, price has been ranging between two daily swap levels (0.7844 and 0.7691). However, as you can probably see, price has recently been teasing the upper range resistance at 0.7844, which, from where we’re standing looks poised for a breakout!

4hr Timeframe: For those who read our last report on the Aussie, you may recall us mentioning that we were watching for lower timeframe buying confirmation around the 4hr demand area at 0.7741-0.7771. Unfortunately, no signal to buy was spotted, which is a shame since as you can see price did indeed rally higher from here.

Buying seems to be more favorable at the moment for two reasons. Firstly, price is currently positioned just above weekly demand, and secondly, the daily chart is also showing signs that price may breakout higher (see above). Nevertheless, our team cannot condone buying just now, for the simple reason that the daily swap level could still repel the market. Therefore, what our team is watching for, or dare we say ‘hoping’ for, is price to close above the daily swap level, which will likely do three things:

• Stop out the sellers attempting to fade this level.
• Trap any breakout buyers.
• Clear the path north up to 4hr supply coming in at 0.7905-0.7881.

However, if price does indeed close above this level, we do not want this 4hr supply area to be hit. The reason for this is because this supply area will be our target for any longs (if price retraces of course) taken from either the round number 0.7800, or the 4hr demand area mentioned above at 0.7741-0.7771 (tentative buy orders are seen just above at 0.7776) as per the green arrows.

Current buy/sell orders:

• Buy orders: watching for confirmed buys around 0.7800 (Predicative stop-loss orders seen at: dependent on where one confirms this level) 0.7776 (Predicative stop-loss orders seen at: 0.7736).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

USD/JPY:

Weekly Timeframe: The weekly timeframe shows price has closed just above the upper limits of a symmetrical triangle formation (121.83/117.43). Assuming that the buyers can hold out above this barrier, further upside could be seen this week up to around the weekly Quasimodo resistance level coming in at 122.18.

Daily Timeframe: The latest from the daily timeframe reveals that price is currently being supported by a daily decision-point demand area coming in at 118.32-119.09. This support barrier does not look very stable in our opinion due to the break lower seen on the 17/02/15. In the event that price closes below this area, we’ll likely see renewed selling interest down to a daily demand area positioned at 116.86-117.54.

4hr Timeframe: Recent developments on the 4hr timeframe show that a sell off was seen on Friday, but consequently found the 4hr decision-point area at 118.32-118.54 (located deep within the aforementioned daily decision-point area) supportive enough for the buyers to rally price back up to 119.00, which, as you can probably see, is exactly where the market closed for the week.

Although we’ve seen price close above the weekly triangle formation (see above), our team will not commit to buying this market until price consumes the 119.35 4hr swap level. The reasons for why are as follows:

• Price action around the daily decision-point demand area (see above) has not exactly been showing much in the way of buying strength at present. What is more, this daily area was (as mentioned above) also breached on the 17/02/15, thus some of the buyers may have already been stopped out i.e. consumed.
• Potential round-number resistance at 119.00.

Closing above 119.35 will likely see a prompt retest forcing the market up to at least 120.00. This is something our team would most definitely be interested in taking part in, as it would also offer some confirmation that the recent close above the weekly triangle (see above) was genuine.

With regards to selling, our team have come to a general consensus that it would be in our best interest to wait for a close below the aforementioned 4hr decision-point demand area before considering shorting this pair, since this would likely set the stage for a continuation move south down towards 117.86. On a side note, if anyone is considering shorting 119.00 today, remain vigilant to the possibility that the sellers may have already been taken out here by the wick seen at 119.17 seen just before the close.

Current buy/sell orders:

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

USD/CAD:

Weekly Timeframe: Although price did see a little recovery last week, the fact still remains that the weekly Quasimodo resistance level continues to hold the market lower. It will be interesting to see what the lower timeframes have to say about this…

Daily Timeframe: The reason for the recent buying interest on the weekly timeframe at the moment may stem from the support currently being seen from a daily decision-point demand area at 1.2378-1.2468.

This barrier however, appears weak from the recent spikes seen below it (03/02/15 – 17/02/15), and could, in our opinion give way at any time.

4hr Timeframe: The 4hr timeframe shows that buying interest was clearly present around a small 4hr Quasimodo support level at 1.2419 on Friday, which, as you can see pushed the market back up to a 4hr supply area coming in at 1.2572-1.2522.

Given the points made above, buying this pair is something our team will not commit to as entering long into the aforementioned 4hr supply area is not permitted in our trading plan. With regards to selling however, our team is currently looking at shorting around this 4hr supply area, with 1.2423 in mind as a first-take profit target. For anyone also considering taking a short here, be sure to keep a close eye on the 1.2500 hurdle seen just below it, as this could very well repel the market and put you into drawdown. We intend to trade this area conservatively by waiting for price to close below 1.2500 first on say the 15 or 30 minute timeframe and then begin looking for confirmed shorts.

To sum up, we’re favoring shorts over longs for the following reasons:

• In line with the weekly timeframe picture (see above).
• 4hr supply at 1.2572-1.2522 (albeit not fresh).
• The aforementioned daily decision-point demand area has been showing weakness over the past couple of weeks (see above), therefore we believe a break lower is likely on the cards.
• Once the 1.2500 hurdle is taken out, we see a relatively clear profit target down to the 1.2419 4hr Quasimodo support level.

Current buy/sell orders:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: watching for confirming price action (as above) around the 4hr supply area at 1.2572-1.2522 (Predicative stop-loss orders seen at: 1.2578).

USD/CHF:

Weekly Timeframe: The weekly timeframe shows that the buyers attempted to push the market above a weekly swap level at 0.9382 last week, but found selling opposition too strong to overcome around the 0.9529 level. This consequently forced the market to close lower at 0.9370.

Daily Timeframe: (Similar to the weekly timeframe) Following Thursday’s retest of the weekly swap level seen at 0.9382, Friday’s sessions saw aggressive selling come into the market from a daily swap area seen at 0.9529-0.9568. This (as already mentioned above) forced the market to close back below the weekly swap level, and has at the same time likely cleared the path south towards a daily decision-point demand area at 0.9267-0.9334.

4hr Timeframe: Last week’s close (0.9370) will likely force the market to test a small 4hr decision-point demand area coming in at 0.9313-0.9356 sometime today, which, if you look back to the daily chart, you’ll see it is located just above the aforementioned daily decision-point demand area.

On the subject of the daily timeframe, take a look at the internal structure of this daily decision-point demand area on the 4hr chart. From where we’re standing, we see very little active demand left within this zone – check out the consumption tails seen at: 0.9228/0.9259/0.9290. That being the case, the small 4hr decision-point demand area just mentioned and the round-number 0.9300 seen just below it effectively remain the only barrier stopping price from trading down to the weekly swap level coming in at 0.9204.

With all of the above taken into account, risk/reward considerations would argue against entering long at this 4hr decision-point demand area with the weekly swap level (0.9382) looming just above. A break below the 0.9300 level on the other hand would likely prompt a rapid retest down towards the weekly swap level at 0.9204. This is something (if lower timeframe confirmation is seen) we’d be very interested in taking part in.

Current buy/sell orders:

• 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 further buying was seen last week which consequently saw price close (18130) above the 18098 high. If the buyers can maintain their position above this number, this will likely suggest a more bullish bias going forward.

Daily Timeframe: (Similar to the weekly timeframe analysis) Friday’s trading action saw price retest the 17896 daily swap level and break above daily supply coming in at 18098-18045. As long as the buyers can hold out above this supply area, further upside will likely be seen this week.

4hr Timeframe: The recent ascent saw price obliterate the 4hr supply area at 18047-18014 and (as already mentioned) close above the 18098 high. This has certainly captured our attention. If price retests this number as support sometime this week, one could trade this level by either entering at market, or, if you’re more conservative, like us, you may choose to wait for confirming price action on the lower timeframes around the 18101 mark.

The reason for us choosing to wait for confirmation here is simply because this level may not be respected as support, and thus further downside could be seen towards the newly-formed 4hr swap area coming in at 18047-18014.

Current buy/sell orders:

• Buy orders: 18101 [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).

XAU/USD (Gold):

Weekly Timeframe: The weekly timeframe shows that price closed below the weekly swap level at 1222.2 last week, which, as you can see, has forced the market in the direction of a weekly demand area coming in at 1166.8-1195.0.

Daily Timeframe: Friday’s trading action reveals that price closed below a daily decision-point demand area at 1204.4-1216.5, which in turn saw price attack a small daily swap level at 1200.0. Admittedly, this level could repel the market here and trade higher. However, our team believes that this level may already be weak from the touch seen on the 18/02/15, thus a break lower is more likely in our opinion.

4hr Timeframe: Consequent to the recent selling seen on gold, price closed (1201.8) very near to Wednesday’s swing low at 1197.4. If this level is consumed, further selling will likely be seen down towards the 4hr decision-point demand area coming in at 1186.6-1194.3, which, if you remember from our previous analysis was the overall target for any shorts taken from the 1217.3 level above.

In the event that this target is hit sometime during the week, this in effect could be a nice area to begin looking for longs, since this zone represents the upper limits of the aforementioned weekly demand area (see above).

Current buy/sell orders:

• Buy orders: will watch how price behaves if/when price reaches the 4hr decision-point demand area at 1186.6-1194.3 (Predicative stop-loss orders seen at: N/A).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

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