Monday 2nd February: Weekly technical outlook and review.

EUR/USD:

Weekly Timeframe: The EUR/USD pair closed the week (1.1276) attempting to defend a weekly Quasimodo support level visible at 1.1109. In the event that further buying is seen this week, we feel there is a good chance prices may reach the weekly supply area sitting at 1.1678-1.1458.

Daily Timeframe: The daily timeframe shows that ever since Tuesday’s candle closed, the buyers and sellers have been seen pulling for position around the underside of a daily swap level coming in at 1.1378. This level remains a key obstacle to a move towards a daily decision-point supply area seen at 1.1678-1.1540, which is coincidentally located deep within the aforementioned weekly supply area.

4hr Timeframe: From a technical standpoint, the Euro has seen very little change since we last had the pleasure of analyzing this exciting pair…

The 4hr timeframe shows that the price finished the week trading in 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. Keeping the above in mind, our team still stands by what they agreed upon on Thursday, which was, 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 buys would be to wait for prices to close above a minor 4hr swap level seen at 1.1458 (in blue), 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.

On a side note, we always have a printout of the upcoming news releases, what times, and the expected impact, since attempting to trade the news release itself can invalidate any technical signals seen. We would recommend looking at the news as more of a vehicle that moves price to zones of interest which then offers trading opportunity.

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: Technically, the weekly timeframe picture appears weak, as last week saw the market print an inverted pin-bar candle forcing price to once again close (1.5048) within weekly demand at 1.4812-1.5097. In addition to this, price could not even muster the strength to close above a relatively long-term weekly trendline level (1.4225 – 17/05/10), which in itself does not exactly inspire GBP confidence at the moment.

Daily Timeframe: The daily timeframe shows that supply seen at 1.5211-1.5140 is likely what stopped prices from rallying higher last week. The recent move south from here forced sterling down towards a minor daily demand area seen at 1.4950-1.5034 (located within the aforementioned weekly demand area).

4hr Timeframe: Latest developments on the 4hr timeframe saw price drop deep into a 4hr decision-point demand area at 1.4977-1.5016, and attack the 1.5000 handle. There were clearly active buyers here as price rallied higher into a 4hr swap area coming in at 1.5058-1.5103.

Given the points made above, what do we believe is in store for the GBP/USD pair this week? Well, at this point in time, the weekly chart action does not show us anything to tempt us to trade long. The daily chart on the other hand shows price lingering around daily demand, but with daily supply looming just above like a big rain cloud, entering long based off of this is something we’re just not comfortable with (see above for levels). This just leaves us with the 4hr chart…

From a technical perspective, we see troublesome resistance barriers coming in at:

• The aforementioned 4hr swap area.
• A 4hr decision-point supply area at 1.5161-1.5130.
• And last but not least the ‘good old’ round-number 1.5200.

From where we’re standing, this is a lot of ‘wood to chop through’, and is something we feel is best left alone for the time being. Therefore, with buying out of the question, where does this leave selling? Our team has discussed this in detail and has decided no selling will be undertaken until we see either a clear near-term profit target to strive for, or the aforementioned weekly demand area gets taken out.

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 Aussie Dollar continued to decline in value against the U.S Dollar last week, consequently forcing the market to close (0.7756) deeper within the weekly demand area seen at 0.7699-0.7974. In the event that this area is consumed, price will almost immediately be trading into a strong-looking weekly demand area coming in at 0.7449-0.7678.

Daily Timeframe: The daily timeframe shows that price was recently driven deep into a daily Quasimodo support area at 0.7699-0.7834. With that, we believe this area to be the last line of defense for the aforementioned weekly demand area, which in all honesty, looks to be ‘hanging on by a thread’ just waiting to be snipped.

4hr Timeframe: Recent developments on the 4hr timeframe likely represent how weak the buyers really are within weekly and daily demand (levels above) at the moment. Take note of the three selling wicks printed around the base of the minor 4hr supply area at 0.7798-0.7772 into the close. This is significant to us since on the one hand, the weekly and daily chart show price in demand, but on the other, price is struggling to trade above a small, almost meaningless 4hr supply barrier (see above for levels). Anyone see the problem here????

Under the above circumstances, we have absolutely no interest in buying the Aussie this week until the buyers prove themselves by closing price above the aforementioned 4hr supply area, and successfully retesting it as demand. Selling at this point would usually go against our conservative nature, as we tend to avoid selling, or buying for that matter into higher-timeframe structures. However, as we mentioned in Friday’s analysis, we still have one eye on price action around the current 4hr supply area, if lower-timeframe confirmation presents itself here, and it looks to be of good quality, we’ll likely take a small position south and try to ride it to 0.7700, which is of course the absolute limits of both the aforementioned weekly and daily demand areas.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: watching lower-timeframe action around the 0.7798-0.7772 area (Predicative stop-loss orders seen at: 0.7805).

USD/JPY:

Weekly Timeframe: The USD/JPY pair seems to have stagnated over the past two weeks as price closed (117.51) within last week’s range (118.85/116.91) consequently forming yet another inside bar pattern. 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 forming what looks to be a bullish continuation flag (depicted with green lines). Overall though, the pair remains trapped between a small daily supply area coming in just above at 119.95-119.14, and a daily demand area seen below at 115.55-116.38. It will be interesting to see what the 4hr timeframe has to say about this…

4hr Timeframe: (From a technical standpoint little has changed over the past week, and as such our analysis remains the same).

The 4hr timeframe shows that the buyers and sellers continued to battle for position between the 4hr supply area seen at 118.84-118.52, and the 4hr demand area at 116.91-117.22 last week.

With all of the above taken into consideration, we can see that the weekly chart shows price trading just above a weekly swap level (see above), while the daily chart 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:

• 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.
• 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:

• 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.
• 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 USD/CAD pair continued marching north last week with price moving a little over 285 pips (open/close)! With this, price finally hit the weekly Quasimodo resistance level at 1.2765 forcing prices to close at 1.2716. In the event that the market breaks above here, we see very little stopping the buyers attacking the high 1.3063.

Daily Timeframe: As we can all see, price recently spiked above the daily supply area at 1.2713-1.2595 to reach the aforementioned weekly Quasimodo resistance level. There will very likely be a tug-of war seen today and possibly into the week, as on the buy side we see triggered buy stops from traders who shorted this daily supply area, and buy orders from traders attempting play to breakout. On the sell side however, we potentially have huge sellers coming in at the weekly Quasimodo resistance level. Assuming that the sellers outweigh the buyers here, which is a strong possibility in our opinion, a decline in value down to a daily decision-point demand area coming in at 1.2378-1.2468 could well be in store.

4hr Timeframe: This is twice now we’ve attempted to enter long on the retest of a psychological number (1.2500/1.2600), and each time, price hovers just above the level literally taunting traders trying to get in on the uptrend before finally taking off like a rocket…

As we can all see price closed just above the 1.2700 handle last week, as such, if the buyers can hold out above here, we could possibly see the higher-timeframe weekly Quasimodo resistance level breached (level above).Conversely, a push below 1.2700 could inspire the sellers to continue shorting this market down a small, yet very likely powerful 4hr decision-point demand area at 1.2606-1.2626. The reason we believe this 4hr area to be significant is simply because this is likely where pro money made the decision to break above the aforementioned daily supply area.

Given the points made above, we have decided to remain flat on this pair. The reasons for why are as follows:

• Buying into higher-timeframe weekly Quasimodo resistance is something we tend to avoid, unless we have very strong reason to believe that the higher-timeframe structure is on the verge of being consumed.
• Selling into this relentless uptrend is something we’ll only consider once/if price breaks below the aforementioned 4hr decision-point demand 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).

USD/CHF:

Weekly Timeframe: The weekly timeframe reveals that for the past two weeks corrective buying has been seen from a weekly swap area coming in at 0.8525-0.8274, which incidentally saw price recover nearly 50% of its value lost during the ‘black Thursday’ shock (Jan 15^th). However, with price closing the week at 0.9197 just below a major weekly swap level at 0.9204, we have to be prepared for some resistive pressure to be seen this week…

Daily Timeframe: The past two weeks has seen two noteworthy areas of demand form, the lowest coming in at 0.8497-0.8697, the most recent, a daily decision-point demand area seen at 0.8933-0.9018. For anyone considering shorting this corrective market at the aforementioned weekly swap level, you may want to note down this near-term decision-point area of demand as a potential obstacle.

4hr Timeframe: Thursday saw the market rally quite aggressively, breaking above both 0.9100 and 0.9200 in the process. Friday on the other hand was less eventful as price was seen teasing 0.9200 effectively retesting it as support. However, support failed going into the U.S session resulting in price closing below this psychological threshold, potentially attracting further selling this week down to 0.9100.

Given that the weekly timeframe shows price trading around resistance at the moment, and the daily timeframe suggesting much the same (see above for levels), we are going to temporarily put a hold on any buying until price convincingly breaks above this weekly level. Selling on the hand could be a possibility on the retest of 0.9200 with 0.9100 as a near-term target, which should in all honesty not be too hard to reach considering the recent rise in volatility on this pair. Selling at market here is something we’re not comfortable doing, as price could just as easily fakeout above this round number, lower-timeframe confirmation is a must for us here!

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: Watching for lower-timeframe selling confirmation around the 0.9200 handle (Predicative stop-loss orders seen at: dependent on where one confirms this level).

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: Friday’s action saw the DOW wipe out any gains made from Thursday’s rally as price was swiftly brought back down to a daily demand area coming in at 17032-17186 (surrounds the aforementioned ignored weekly Quasimodo level). In the event that this area fails to hold, this may set the stage for a move south towards a daily decision-point demand area at 16895-16997. This area remains significant to us since this is where pro money likely made the decision to initially break above the weekly Quasimodo resistance level (see above).

4hr Timeframe: As you can see, the market really took well to the minor 4hr Quasimodo resistance level at 17500, price was pushed back down to the 4hr decision-point demand area at 17084-17150, which is located within daily demand at 17032-17186. For anyone who read Friday’s analysis, you may recall us mentioning that we were long from 17182, and was looking to take full profits at the 4hr supply area seen above at 17698-17663, which obviously did not happen. Fortunately, we managed to liquidate our full position at the 17373 mark on the basis of negative price action seen on the 30 minute timeframe.

With the above taken into account, our team has come to a general consensus that the DOW may be setting up for another rally north. Supporting factors are as follows:

• Price is currently hovering above an ignored weekly Quasimodo level at 17135.
• Interest has been seen at the current daily demand area coming in at 17032-17186.
• And finally, price is trading at a smaller, yet clearly resilient 4hr decision-point demand area at 17084-17150.

We fully agree that this area of demand is suggesting entering long here, but one should always look at what the surrounding price action is saying! Immediately to the left you’ll notice that this area has already been visited on 29/01/15 at 17130, this means some of the buying pressure i.e. demand has very likely been consumed and thus indicates potential weakness. With this in mind, we’ve opted to take a step back and wait for confirming price action on the lower timeframes around the 17165 area before considering going long again.

Current buy/sell levels:

• Buy orders: 17165 [Tentative] (Predicative stop-loss orders seen at: 17069).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

XAU/USD (Gold):

Weekly Timeframe: Recent events on the weekly timeframe show that price formed a nice-looking bullish pin-bar candle off of a weekly swap level seen at 1251.5. This came shortly after price broke above a weekly supply area coming in at 1296.3-1269.3. Could this mean a rally higher may be in store this week?

Daily Timeframe: The daily timeframe shows that the weekly pin-bar candle was formed during Thursday and Friday’s trading sessions. What the daily timeframe also shows is that for prices to continue north, selling opposition around a minor daily decision-point supply area at 1297.4-1284.3 will need to be (closed above) consumed. Should this area be taken out, price will then likely be free to test a daily supply area seen at 1319.2-1308.6.

4hr Timeframe: Latest developments on the 4hr timeframe suggest we may not have to wait for prices to close above the daily decision-point supply area at 1297.4-1284.3. Gold was seen closing (1283.2) deep within a 4hr decision-point supply area at 1284.9-1278.1, which if you look on the daily timeframe is located just below the aforementioned daily decision-point supply area.

Assuming that price closes above this 4hr decision-point supply area sometime this week, this could in effect be a signal to begin preparing to enter long. What you’re likely thinking now is: ‘but if you look for buys once price breaks the 4hr decision-point supply area, will you not be buying into the daily decision-point supply area?’ Effectively, yes we would. But, take a look above this 4hr area, check out the wicks marked with green arrows at 1292.9/1297.4/1299.0/1299.5, to us these represent consumption, i.e. very little selling pressure left. So with that, the path north, upon breaking above the 4hr decision-point supply area will likely be open for prices to test the 4hr swap level coming in at 1305.20, which is conveniently located just below the daily supply area mentioned above at 1319.2-1308.6.

With the above in mind, if prices were to break above the 4hr decision-point supply area, where could one look to enter long? Well, assuming price retraces following the break, we really like the look of the small 4hr decision-point demand area seen at 1258.3-1266.4 with the aforementioned 4hr swap level in mind as a target (as per the blue arrows).

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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