Tuesday 20th January: Daily technical outlook and review.

EUR/USD:

Weekly Timeframe: The weekly timeframe currently shows that the buyers and sellers are battling for position within a major weekly demand area coming in at 1.1373-1.1617. Further buying from here could potentially see the Euro visit 1.1758, an ignored weekly Quasimodo level.

Daily Timeframe: Yesterday was clearly a day for the buyers as the market extended higher from daily demand at 1.1443-1.1533 (located within the aforementioned weekly demand area). Assuming that the buyers remain strong here, we see very little stopping the Euro from rallying towards a daily decision-point supply area visible at 1.1869-1.1771. This area holds weight with us since this was where pro money likely decided to push below the aforementioned ignored weekly Quasimodo level.

4hr Timeframe: The 4hr timeframe shows that ever since the market opened at 1.1550, the buyers clearly outweighed any selling opposition. Price broke above the 1.1600 handle and climbed to a small 4hr supply area seen at 1.1647-1.1625.

From a higher-timeframe perspective, 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, and price trading within 4hr supply (see above) at the moment, buying right now may not be the best path to take at least until the aforementioned 4hr supply area is consumed.

Selling on the other hand will only be permitted once/if price closes below 1.1600 and successfully retests it as resistance. Using lower-timeframe confirmation is advised here, since we would effectively be selling into higher-timeframe opposition.

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 weekly timeframe shows that there is currently very little buying interest being seen around a weekly demand area at 1.4812-1.5097. From a technical perspective, this weekly demand area should be particularly attractive to investors, since it also boasts trendline confluence from the low 1.4225 (17/05/10).

Daily Timeframe: For the second time this month (previous was on 07/01/15), price is once again trading around a daily Quasimodo support area at 1.5007-1.5097.

4hr Timeframe: With both the weekly and daily timeframe showing price in demand at the moment, we are naturally favoring longs at the moment. Potential areas to watch for buying activity come in at the 1.5100 level (tentative buy orders are seen around 1.5103), and just below around a 4hr Quasimodo support area at 1.5026-1.5060 (tentative buy orders seen at 1.5067), which is located within the aforementioned daily Quasimodo support area. We would only consider buying around these areas if mouth-watering lower-timeframe confirmation was seen, as even though price is in higher-timeframe demand, we are still effectively buying against the overall trend here.

Current buy/sell levels:

• Buy orders: 1.5103 [Tentative] (Predicative stop-loss orders seen at: dependent on where one confirms this level) 1.5067 [Tentative] (Predicative stop-loss orders seen at: 1.5018).
• Sell orders: Flat (Predicative stop-loss orders are seen at: N/A).

AUD/USD:

Weekly Timeframe: The weekly timeframe shows that price remains trading deep within a major weekly demand area seen at 0.8064-0.8460. For prices to continue rallying, the buyers will need to 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).

Daily Timeframe: Last week saw the Aussie rally 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 and at the same time likely cleared the path up to at least 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. It will be interesting to see what the 4hr timeframe shows.

4hr Timeframe: Technically, very little movement has been seen, and as such most of our previous analysis remains the same. The 4hr timeframe shows that ever since the market opened at 0.8217, the AUD/USD pair has been ranging, using the 0.8200 handle as a ‘supportive floor’ so to speak.

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, each tradable in their own right:

1. In the event that the buyers continue to hold out above 0.8200, we’d be interested in buying using lower-timeframe confirmation, with 0.8300 in mind for a target. The reason for requiring lower-timeframe confirmation here is simply because psychological levels such as these are often prone to fakeouts.
2. 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 with lower-timeframe confirmation entering long 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 long) 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 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 [Tentative] (Predicative stop-loss orders seen at: 0.8143).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

USD/JPY:

Weekly Timeframe: The USD/JPY pair shows that buying interest is being seen from just above a major weekly swap level coming in at 115.50.

Daily Timeframe: The recent buying momentum seen from daily demand coming in at 115.55-116.38 (seen just above the aforementioned major weekly swap level) has managed to break above a minor daily swap area seen at 117.22-117.64. This move has potentially cleared the path north for further buying towards a daily supply area at 119.95-119.14. It will be interesting to see what the 4hr timeframe has to say about this.

4hr Timeframe: The 4hr timeframe reveals that the USD/JPY pair sold off yesterday at the open (117.43), but consequently found 117.00 to be supportive enough to allow the buyers back into play. As such, this attracted further buying into the market which pushed prices north towards a 4hr supply area visible at 117.93-117.69.

With both the weekly and daily timeframes showing support in the market, our bias for the time being is long. However, buying into the current 4hr supply area is something we’re not willing to do no matter how good the higher-timeframe picture looks. A close above this 4hr supply and preferably 118.00 would be our signal to begin looking for buying opportunities on the (possible) retest of 118.00. Selling on the other hand is risky considering the higher-timeframe strength that is being seen, but not out of the question. A break below the 117.41 low on the 30 minute timeframe would likely confirm that a short-term move down to 117.00 may well be in store.

So, with the above in mind, buying is not permitted for the time being, and selling will only be considered if prices break the 117.41 low on the 30 minute timeframe.

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: Last week saw the USD/CAD pair close above a major weekly swap level coming in at 1.1870. As a result, price advanced to a fresh high of 1.2045, and has at the same time likely opened the gates to much higher prices in the future.

Daily Timeframe: The daily timeframe however shows that in order for further buying to take place, a daily swap level at 1.2022 will need to be taken out beforehand.

4hr Timeframe: The 4hr timeframe shows that the 1.2000 psychological level is proving a difficult barrier to break. With that being said, the two spikes seen above this number (red arrows), the first at 1.2016 (14/01/15), and the second, the larger of the two at 1.2045 (16/01/15) may have been enough to stop out the majority of sellers attempting to fade this level. Therefore, could we assume that this level is weakened? We believe so, especially with the recent break above the major weekly swap level (see above).

With the above in mind, selling at current prices is not something we’d be comfortable with at the moment. We are however interested in looking for buying opportunities between the 1.1900 handle, and the aforementioned weekly swap level (yellow area). Lower-timeframe buying confirmation will be needed here since the daily timeframe shows that other than the weekly swap level itself, there’s really very little stopping prices from faking below into a daily decision-point demand area seen at 1.1795-1.1834.

Current buy/sell levels:

• Buy orders: watching for lower-timeframe confirmation between 1.1900 and 1.1870 (Predicative stop-loss orders seen at: 1.1864).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

DAX 30:

Weekly Timeframe: Last week shows that the rebound seen from the weekly decision-point demand area at 9126-9467 has recently extended higher and closed above the weekly resistance level at 10048. Providing that 10048 now holds as support, we see very little reason why the DAX cannot continue higher.

Daily Timeframe: Similar to the weekly timeframe, the daily timeframe shows price breaking above the 10094 high which as a result formed a daily swap area at 10094-10007. In the event that this swap area can provide support, we see very little stopping this market from continuing north.

4hr Timeframe: The 4hr timeframe shows that ever since the market opened at 10276, the buyers and sellers have been trading around the upper limit of an ascending channel (9216 – 16/12/14, 9919 – 19/12/14). In the event that this resistance is successful in motivating the sellers to push south here, we see buying opportunities at the following near-term swap areas:

1. 10094-10068 (tentative buy orders are seen at 10103); this area remains a relatively strong zone to watch for buying since its located deep within a daily swap area mentioned above at 10094-10007.
2. 9945-9917 (tentative buy orders are seen at 9953), this area also holds significance since it was likely here that pro money made the decision to break above the high10094, thus unfilled buy orders may still be lurking around this area.

Buying at these areas is high probability in our opinion. However, we have no intention of placing pending buy orders at either of these areas since price so very often fakes below swap areas such as these. Lower-timeframe confirmation is a must here.

Current buy/sell levels:

• Buy orders: 10103 [Tentative] (Predicative stop-loss orders seen at: 10055) 9953 [Tentative] (Predicative stop-loss orders seen at: 9903).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

DOW 30:

Weekly Timeframe: The weekly timeframe shows that for six consecutive weeks price has been hovering above an ignored weekly Quasimodo level at 17135. In the event that this level fails, follow-through selling will likely be seen down towards a weekly support level coming in at 16051.

Daily Timeframe: Friday’s trading action saw buyers entering the market just above a daily demand area at 17032-17186 (this area surrounds the aforementioned ignored weekly Quasimodo level), despite this, there was very little follow-through seen yesterday. Hopefully, the 4hr timeframe will offer us a little more information.

4hr Timeframe: The 4hr timeframe shows that ever since the market opened at 17508, the 4hr supply area at 17638-17537 has been holding the market lower. What is interesting about the 4hr timeframe is that we may have confirmed direction down to the 4hr decision-point demand area seen at 17084-17150. The reason for why is simply because price likely consumed the majority of buyers around the 4hr demand area at 17248-17344 on Thursday, seen marked with a red arrow.

Therefore, with the above in mind, we potentially have direction, and a target, but how can one take advantage of this potential move? We see two options (as per the blue arrows):

1. Watch current price for lower-timeframe confirmation and target 17157.
2. For better risk/reward, wait for price to break above the aforementioned 4hr supply area and hit a 4hr decision-point supply level at 17779 (tentative sell orders are seen just below at 17770), which as you can see converges beautifully with a trendline formed from the high 18099. Again, we would recommend waiting for selling confirmation here too.

Above all, entering short at either of these areas requires close attention, as we mustn’t forget that we would be effectively selling into higher-timeframe opposition here.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: 17770 [Tentative] (Predicative stop-loss orders seen at: dependent on where one confirms this level).

XAU/USD (Gold):

Weekly Timeframe: The weekly timeframe shows that Gold has pushed above the weekly supply area at 1255.2-1226.1, and traded directly into another weekly supply area coming in at 1296.3-1269.3.

Daily Timeframe: Recent trading action on the daily timeframe shows that price engulfed a daily supply area at 1277.1-1261.6, which as a result likely cleared the path north up to a small daily supply area seen at 1296.3-1289.2 (located deep within the weekly supply area mentioned above at 1296.3-1269.3).

4hr Timeframe: From a technical perspective, the Gold market has moved very little since the open (1279.3). Price only just recently woke up and spiked south to a 4hr swap area seen at 1271.6-1266.7, where buying interest is clearly evident.

Let’s just quickly recap here, so that we’re all on the same page. The weekly timeframe shows price in supply, while the daily timeframe suggests price could likely rally higher into this weekly supply area (see above). However, for the time being, risk/reward parameters argue against entering long around the aforementioned 4hr swap area with a 4hr swap level looming just above at 1280.37. Selling on the other hand is something we’d only be interested in if price broke below the 4hr swap area, as this would likely clear the path south towards a nice-looking 4hr swap level seen at 1257.1.

Price action is clear on Gold at the moment; the only problem is we see very little opportunity to participate at the moment. Therefore, standing on the sidelines here may be the best path to take until more opportune price action presents itself.

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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