Thursday 8th January: Daily Technical outlook and review.

EUR/USD:

Weekly Timeframe: The weekly timeframe shows that price has breached a major weekly demand area seen at 1.1875-1.2095. Assuming that the majority of buyers are consumed here, price will likely be free to test a weekly Quasimodo support level seen below at 1.1758. However, as always, do be prepared for the possibility a sneaky fakeout may take place here.

Daily Timeframe: The recent break below daily demand seen at 1.1875-1.1971 consequently forced the Euro down towards a partially consumed daily demand area coming in at 1.1776-1.1838. This could – assuming that the buyers can successfully defend this area of course, provide a base to support a fakeout below the recently breached weekly demand area mentioned above. Let’s see what the 4hr timeframe has to say about this.

4hr Timeframe: The 4hr timeframe shows that the recent descent found the 1.1800 handle to be supportive enough to allow the buyers back into play. The rebound seen here does indeed look promising; nonetheless the only way to know if the buying was genuine and not just traders short-covering would be for the market to drive deep into minor 4hr supply consuming any selling opposition that may reside there. As things stand, we have absolutely no interest in selling this pair at the moment, and likewise buying will only be considered once/if the above takes place. Therefore with this in mind, opting to stand on the side lines here may be the best path to take.

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 GBP/USD pair continues to plummet as prices are forced into a weekly demand area seen at 1.4812-1.5097. Could this area be supportive enough to allow the buyers to make a stand here? Let’s see what the lower timeframes show.

Daily Timeframe: The recent sell off seen yesterday saw price breach a daily demand area seen at 1.5101-1.5206. The sellers seem to be losing steam however, as buying interest is currently seen flowing in from a daily Quasimodo support area coming in at 1.5007-1.5097 (located just within the aforementioned weekly demand area)

4hr Timeframe: The 4hr timeframe shows that the 4hr Quasimodo support area at 1.5101-1.5150 has recently been engulfed (located deep within the aforementioned daily demand area). This move will likely attract further selling down towards the humongous 1.5000 level or potentially the 4hr demand (ignored supply) area at 1.4979-1.4935 given enough time. This will consequently drive prices deeper into the weekly demand area (see above), and also test the extreme limits of the daily Quasimodo support area mentioned above at 1.5007-1.5097.

The reasoning behind believing prices can drop so far is simply because to the left of current price, we see very little active demand. Check out the demand consumption tails seen at 1.5078/1.5043.

With all of the above taken into consideration, we intend to be looking for selling opportunities around 1.5100, and if this level breaks, around 1.5200, ultimately be targeting 1.5000. Lower-timeframe selling confirmation is advised here since as most already know, psychological levels are sometimes prone to deep fakeouts.

Current buy/sell levels:

• Buy orders: Watching for confirmed shorting action around 1.5100 (Predicative stop-loss orders seen at: dependent on where on confirms this level). Also will be watching for confirmed shorts around 1.5200 if price reaches this far (Predicative stop-loss orders seen at: dependent on where on confirms this level).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

AUD/USD:

Weekly Timeframe: The weekly timeframe reveals that price has recently pushed below a major weekly demand area seen at 0.8064-0.8460, which as a consequence could entice further selling down towards another weekly demand area coming in at 0.7699-0.7974.

Daily Timeframe: Yesterday saw the buyers fight back from the recent selling onslaught seen on Tuesday, which formed a rather pleasing bullish pin-bar pattern within daily demand coming in at 0.7958-0.8070. However, is this really enough to consider buying the Aussie when we know that the weekly demand (see above) area has just been taken out? Let’s take a look at the 4hr timeframe to see what we can find.

4hr Timeframe: The 4hr timeframe shows that a double bottom at 0.8034-0.8049 has formed within the aforementioned daily demand area. Risk/reward parameters restrict us from entering long here with potential resistance looming just above at 0.8100. Conversely, in the event that the double bottom area is breached, selling on the break/retest would also not be viable option from a risk/reward perspective, as we could effectively be selling into heavy buying from the huge psychological level 0.8000. With that being said, in the absence of more favorable price action, we‘ve opted to remain flat 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).

USD/JPY:

Weekly Timeframe: The weekly timeframe shows that the buyers and sellers still remain trading between a weekly Quasimodo resistance level coming in at 122.18 and a major weekly swap level seen at 115.50.

Daily timeframe: Yesterday was clearly a good day for anyone buying the USD, as prices rallied deep from within a daily swap area at 119.19-118.04. As a consequence, price remains to be confined between this area and a daily supply area seen above at 121.83-120.66 (Which was essentially a reaction off of a longer-term daily supply area visible at 122.61-121.54).

4hr Timeframe: The recent ascent seen on the USD/JPY pair consequently consumed any selling opposition around the 119.00 handle, and continued to rally until selling interest was seen coming into the market around a minor 4hr decision-point supply area coming in 119.78-119.48. As a result, the momentum south brought prices back down to 119.00, effectively retesting it as support.

At the present time, we are currently favoring longs on this pair simply because of that fact the price is trading within a daily swap area at the moment (see above). Nevertheless, from a risk/reward perspective, entering long around 119.00 is not very appealing to us, unless of course we can get an entry on the very low timeframe with a small stop. In which case, one could target the 4hr supply area above at 119.78-119.48 for around 40-45 pips.

With the way price action is structured at present, we feel it may be best to sit this one out until more conducive price action is seen.

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/CAD:

Weekly Timeframe: The weekly timeframe shows that a major weekly supply area at 1.1806-1.1473 has recently been breached. As a result of this, the path north towards a major weekly swap level lurking just above at 1.1893 is likely clear.

Daily Timeframe: Tuesday saw the USD/CAD strongly close above 1.1800, which – like the weekly timeframe has potentially cleared the path north for price to test the aforementioned weekly swap level. In the event that price retests the 1.1800 handle as support before hitting the weekly level, this would provide us with a solid base to enter long, and a respectable target. Let’s see what the 4hr timeframe has to say about this.

4hr Timeframe: From a technical standpoint, very little movement has been seen on the USD/CAD. As such, most of our previous analysis remains valid.

The 4hr timeframe shows much the same as the daily timeframe with only a small (but crucial) difference. We mentioned in the daily timeframe analysis that if price retested 1.1800 as support that this could be a nice base in which to enter long at. The 4hr timeframe however suggests that price could very well ignore the 1.1800 level altogether, and continue selling towards a 4hr demand area seen below at 1.1730-1.1749 before rallying towards the weekly swap level (as per the blue arrows).

With the above in mind, we are going to watching for lower-timeframe buying confirmation around the 1.18054 mark, just above 1.1800. In the event that this level is breached, we’ll then consider setting a pending buy order just above the aforementioned 4hr demand area.

Current buy/sell levels:

• Buy orders: 1.18054 (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 relatively aggressive selling has seen the DAX decline in value down towards a weekly decision-point demand area visible at 9126-9467, where active buying is currently being seen.

Daily Timeframe: Yesterday saw the DAX index increase in value from 9459; this was likely caused by the unfilled buy orders left from the recent move north on 16/12/14. We are not fully convinced that this is genuine buying here, it looks to be more like short-covering from where we’re standing since price could not break Tuesday’s high 9626. However, we could be proved wrong today, as we mustn’t forget that price is indeed trading off a nice-looking weekly decision-point demand area at the moment (see above).

4hr Timeframe: At the time of writing, the 4hr timeframe is showing hesitant buying from the 4hr decision-point demand area at 9424-9487.

From here price can either do one of two things, well three really if you count price ranging:

1. Price could break yesterday’s high (9626) and continue rallying north up towards a 4hr swap area seen at 9719-9671. In which case we would have very little to play with in regards to buying or selling this index.
2. A decline in value could be seen, as most of the buyers were likely stopped out by the spike/tail seen below marked with a blue arrow at 9379. As a consequence, this will likely drive prices towards the aforementioned daily demand area, which if you look is situated beautifully around a 4hr minor swap level at 9139. All of this coupled with the fact that price would still be contained within the aforementioned weekly decision-point demand area makes it very hard not to consider buying if/when price reaches here.

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: Buying interest is currently being seen on the weekly chart from 17248, which as you can see just missed the ignored weekly Quasimodo level coming in at 17135. It will be interesting to see what the lower timeframes have to say about this.

Daily Timeframe: Yesterday was a fantastic day for anyone who entered long from the daily swap level seen at 17362, as prices rallied a respectable 228 points (this figure includes pre/after-market hours trading). In the event that the buyers continue with this tempo, we see very little reason why prices cannot continue rallying north up to the daily swap area seen above at 17767-17717.

4hr Timeframe: The 4hr timeframe shows some very interesting price action. We feel that the 4hr decision-point demand area at 17326-17381 (located around the aforementioned daily swap level) has likely seen a fakeout. The reason for why is simply because the buyers created enough upside momentum to consume a 4hr decision-point supply area seen at 17573-17518. As a result, this has also likely opened the gates for prices to challenge the aforementioned daily swap area.

This is all well and good, but how could we take advantage of this potential move north? As we have direction from the 4hr timeframe and confluence from the higher timeframes all locked in. For us, the most conservative way to enter long here would be either at the mid-range 4hr Quasimodo support level at 17460, or just below at a small 4hr decision-point demand area marked in green at 17381-17416. Entering long at the 4hr Quasimodo support level would however require lower-timeframe buying confirmation, since there’s very little stopping price from ignoring this level and trading down towards the aforementioned 4hr decision-point demand area. Considering the momentum north seen from this 4hr decision-point demand area, we’d be relatively comfortable setting a pending buy order just above here at 17422 with a stop set just below the zone at 17371, if/when price reaches here.

Current buy/sell levels:

• Buy orders: Watching for lower-timeframe confirmation around 17460 (Predicative stop-loss orders seen at: dependent on where one confirms this level) 17422 (Predicative stop-loss orders seen at: 17371).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

XAU/USD (Gold):

Weekly Timeframe: The weekly timeframe shows that Gold has been moderately bullish since hitting the weekly decision-point demand level seen at 1136.3 on 03/11/14. Nonetheless, signs of weakness over the past four weeks or so have begun to show just below a weekly supply area coming in at 1255.2-1226.1.

Daily Timeframe: Yesterday saw selling interest come into the market around a daily Quasimodo resistance level at 1221.1, which is located just below the aforementioned weekly supply area. In the event that the buying pressure dries up here, a move south will likely follow down to a minor daily S/R swap level at 1200.00. Let’s see what the 4hr timeframe has to say about this.

4hr Timeframe: Contrary to what the higher timeframe picture is showing, the 4hr timeframe in our opinion is bullish. After price broke out of a 4hr range (1211.3/1172.8), it effectively cleared the path north towards a 4hr supply area coming in at 1244.5-1240.1 (located deep within the aforementioned weekly supply). The reason why we believe price can trade thus high is simply because we see very little active supply between 1212.1 and the 4hr supply area – check out the supply consumption wicks within the green arc pattern! The above also shows that entering short around the daily Quasimodo resistance level (see above) may not be such a good idea at the moment.

We mentioned in yesterday’s report that we are going to attempt to enter long using lower-timeframe confirmation around (confirmation is required because we are effectively trading into higher-timeframe supply – see above) the 1213.5 mark, just above a recently-formed 4hr decision-point demand area at 1205.3-1213.2. This is still the case since we have yet to find a good enough entry on the lower timeframes. If we manage to find an entry long here however, we are going to be ambitious and attempt to target 1238.85, just below the aforementioned 4hr supply area (as per the blue arrows).

Current buy/sell levels:

• Buy orders: 1213.5 [Tentative] (Predicative stop-loss orders seen at: 1204.1).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

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