Tuesday 5th May: Daily technical outlook and review.

EUR/USD:

Weekly view:The weekly timeframe shows price closed above the weekly swap level 1.1096 last week, which forced price to ‘touch gloves’ with a major weekly supply area coming in at 1.1449-1.1278. This has been the most we’ve seen the Euro rally since price began its descent back in May 2014. In spite of this, our long-term bias still remains south and will continue to do so until we see a convincing push above the aforementioned weekly supply area.

Daily view: Late last week, the Euro broke above a daily supply area at 1.1244-1.1158. This move likely triggered buy stops from traders not only attempting to fade this area, but also from those looking to buy the breakout, thus potentially setting the stage for further upside this week. The stops taken from above this zone sent the market south yesterday. This could be a mixture of pro-money sellers capitalizing on the available liquidity (sell stops), and buyers covering positions from the prior six-day advance north. This selling will likely continue until prices reach either the aforementioned weekly swap level, or the daily swap area seen below it at 1.1051-1.0918.

4hr view: Yesterday’s sessions show that the sellers managed to hold out below the 1.1200 number, which in turn saw the market sell off. This sell off, however, was relatively short-lived, as Intraday support at 1.1140 held firm throughout the remaining sessions – no surprise here really considering London was on vacation yesterday.

The 1.1140 support level will likely continue to be respected throughout the Asian sessions today. Once Europe opens for business, we expect to see them try and break through this level, to test the round number/weekly swap area at 1.1100/1.1096. Should this occur, our team will then begin watching for confirmed longs around this small area of support. Should we spot a signal to enter long here, our first-take profit target will likely be around the mid-level number 1.1150.

Our current buy/sell orders:

• Buy orders: 1.1100/1.1096 [Tentative – confirmation required] (Predicative stop-loss orders seen at: dependent on where one confirms this level).

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

GBP/USD:

Weekly view: Last week’s action saw price collide with a weekly supply area coming in at 1.5551-1.5391, consequently forming a beautiful-looking weekly pin-bar candle in the process. Does this mean we should all be looking for shorts this week?

Daily view: From the daily scale we can see that the rebound from within the aforementioned weekly supply area can actually be pin-pointed to a daily Quasimodo resistance level seen at 1.5478. The move from here saw prices aggressively take out a daily swap area seen at 1.5298-1.5208, suggesting further downside may be in store this week at least until prices reach the weekly swap level region 1.4850.

4hr view: The open 1.5144 saw the GBP attempt to rally yesterday, but as expected, found too much selling pressure around the 4hr swap area seen at 1.5172-1.5211.

At this point in time, price is seen teasing the 1.5100 handle which seems to be holding at the moment. Buying from this number today could be possible for a short-term trade up to 1.5150 if we see corresponding lower timeframe confirmation. The reason for why we’re not expecting to see much of a move from this level is simply because it has very little (as far as we can see) higher-timeframe structure supporting it (see above). Therefore, our team is more in favor of a push lower today…

A close below 1.5100 would, in effect, be our cue to begin watching for price to retest this level as resistance. Should a retest take place that shows lower timeframe sellers coming into the market, we’ll likely take a short position, targeting the 4hr demand area at 1.5172-1.5211. The mid-range 4hr demand marked with a green circle at 1.5026-1.5059 could very well have active buyers waiting, and could make for a nice first take-profit area, but since this is considered mid-range to us, we see it being consumed relatively easily.

Our 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).

AUD/USD:

Weekly view: Last week’s action saw price sell off from a long-term weekly swap level coming in at 0.8064. As a result, a nice-looking weekly bearish pin-bar candle printed into the close 0.7839, which could imply further selling may take place this week back down to the weekly demand area seen at 0.7449-0.7678.

Daily view: The daily timeframe on the other hand, shows that price is currently holding nicely above a small daily swap level coming in at 0.7822. Buying from this level is a risky trade in our book considering how aggressive prices sold off last week from the aforementioned weekly swap level. A more conservative approach to entering long would (in our opinion) be to wait and see if price can close back above 0.7875, thus removing potential resistance and creating a more buyer-friendly zone.

4hr view: The open 0.7831 saw the buyers take an almost immediate interest around the 4hr demand area at 0.7790-0.7811 (located just below the daily swap level mentioned above at 0.7822), which, as you can probably see, pushed prices into a near-term 4hr swap area seen at 0.7832-0.7862. With all of the above taken into consideration, our team has come to a general consensus that either buying or selling this pair is best done outside of these two 4hr zones.

A close above the aforementioned 4hr swap area would likely clear the path north for intraday buying (should a retest be seen) up to at least 0.7900. Conversely, a close below the 4hr demand area would likely do three things:

1. Force a daily close below the daily swap level 0.7822, which on its own would likely imply further downside.

2. Clear the path south down to 4hr demand at 0.7709-0.7735.

3. Give traders the opportunity to trade any retest of the current 4hr demand zone.

Our 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/JPY:

Weekly view: For the past month and a half, the buyers and sellers have been seen battling for position within a weekly demand area coming in at 118.22-119.40. Our long-term bias will remain north on this pair as long as price continues to trade above the weekly swap level seen below this area at 115.50.

Daily view: The rebound seen from the daily support level 118.62 extended higher during Friday’s session last week, forcing the USD/JPY pair to close just below a daily Quasimodo resistance level coming in at 120.35. As you can see, a little selling interest was seen from here yesterday, but nothing to get excited about.

4hr view: After a lackluster performance on this pair yesterday, price remains loitering above the 4hr swap area 120.07-119.89.

Friday’s close above 120.22 likely took out the majority of sellers in this vicinity making it a very important number for us. Why this number and why is it important? Take a look above 120.22, notice the strong selling wick seen marked with a black arrow at 120.42; this is very likely a supply consumption wick, meaning that above 120.22, prices would potentially be free of supply/resistance for a rally towards 120.73 – the 4hr Quasimodo resistance level marked in red. With that, today’s spotlight will be firmly focused in on the aforementioned 4hr swap area. In the event that the buyers continue to defend this area today, we believe this would be a fantastic zone to look for confirmed buys from and target 120.73. At this point you may be asking yourself, if I enter long here, would I not be buying into the daily Quasimodo resistance level at 120.35? Yes, you would. However, keep in mind that our target is only 40 or so pips above this level which is a relatively small move in the overall scheme of things on the daily timeframe. Moreover, let’s not forget that price is still trading from weekly demand at 118.22-119.40, so from where we’re standing; a buy trade at the 4hr swap area with supporting lower timeframe confirmation is worth the risk.

Our current buy/sell orders:

• Buy orders: 120.07-119.89 [Tentative – confirmation required] (Predicative stop-loss orders seen at: 119.86).

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

USD/CAD:

Weekly view: Last week saw price aggressively spike below a weekly swap area coming in at 1.2265-1.2092 and snap back into the close 1.2156, thereupon forming a very sturdy-looking weekly bullish pin-bar candle in the process. Could this be a sign that this pair wants to trade higher? Let’s take a look on the lower timeframes to see what we can find…

Daily view: Following the small break above daily supply at 1.2194-1.2102, yesterday’s daily session saw the market sell off. Assuming that this selling interest continues into today, it’s likely we’ll see prices challenge the daily demand area at 1.1931-1.2045 once again.

4hr view: The rebound seen from 1.2200 extended lower during yesterday’s sessions, which in turn, saw the market slam into a 4hr demand area seen at 1.2056-1.2090. Buying from this 4hr demand area today is tricky, not impossible, but tricky. Here’s why… Directly above the 4hr demand zone lays potential round-number resistance at 1.2100, this would have to be broken and retested as support before we’d consider a long position here. Building on that, the daily timeframe shows there’s room to move further south should shorts want to retest the aforementioned daily demand area. And on top of all this, we also see price testing the lower limits of the aforementioned weekly swap area at the moment, which does not really inspire buying confidence in our opinion. Therefore, to answer the question posed in the ‘weekly view’ section above, we believe the weekly bullish pin-bar candle could be a sign that prices will trade higher, but not right now, it appears a little more selling needs to be done first…

If further selling takes place today, this could potentially see the current 4hr demand area consumed and the path south opened up for a move down towards a combined 4hr swap/ round number area 1.2014/1.2000. This small zone would be a fantastic place to look for longs if/when the time comes, since at that point we would be trading deep within the daily demand area mentioned above at 1.1931-1.2045, which converges so beautifully with a Harmonic bullish Bat pattern that completes just below it at 1.1921.

Our current buy/sell orders:

• Buy orders: 1.2056-1.2090 [Tentative – confirmation required] (Predicative stop-loss orders seen at: 1.2051).

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

USD/CHF:

Weekly view: From the weekly scale, we can see that the sellers were the dominant force in the market last week. Weekly support at 0.9512 was taken out, forcing price to sell off down to a strong-looking weekly demand area at 0.9170-0.9343.

Daily view: From this angle, we can see that price is still trading within daily demand at 0.9267-0.9334, which, if you look back to the weekly chart, you’ll notice is located just within the aforementioned weekly demand area.

4hr view: Friday’s closing price 0.9324 provided this market intraday support during yesterday’s sessions. For us, this number and the 0.9300 handle seen below it will be the focal point for today (green area). Considering the overall position on the higher timeframes at the moment, our bias is long on this pair.

With that in mind, assuming that a lower timeframe buy signal is seen within or around the green area today, we’ll look to take a long position here and attempt to ride it up to the 0.9400 area to take partial profits, knowing that we have the full backing of higher-timeframe support (see above) alongside us.

Conversely, if the buyers fail to defend this green area, and a close below 0.9300 is seen, we’d then look to trade any retest seen at this number (with lower timeframe confirmation) all the way down to the 0.9165 mark. Why that far? Well, take a look below the 0.9300 number to the left; can you see the clear demand consumption tails at: 0.9285/0.9267/0.9255/0.9228/0.9194? These tails suggest that demand has already been consumed, thus price could very easily drop down to the next active 4hr support level which is, as far as we can see, the 0.9165 level (positioned deep within the weekly demand area mentioned above at 0.9170-0.9343).

Our current buy/sell orders:

• Buy orders: Watching price action for lower timeframe buying confirmation around the 0.9324 /0.9300 region (Predicative stop-loss orders seen at: dependent on where one confirms this level).

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

US 30:

Weekly view: Although the overall trend has been strong since early 2009, a temporary ‘ceiling’ to this index has formed around the 18098 region which has remained strong for an impressive four months!

Daily view: The daily timeframe shows that the rebound seen from the daily trendline (17033) forced prices to once again test the daily supply area coming in at 18207-18117. Should a sell off be seen from here, we’re expecting supportive pressure to come into the market around the extended daily trendline just mentioned above.

4hr view: (As mentioned in the previous analysis, the DOW has been forming what we believe to be a long-term 4hr bullish pennant formation – upper 4hr trendline extends from the high18279, while the lower 4hr line has been taken from the low 17556).

The open 18005 saw the DOW index rally. This saw prices test the upper limits of the 4hr pennant formation, which, as you can see, converges almost perfectly with 4hr resistance at 18110. We believe this to be a perfect opportunity to begin looking to short this market back down to the lower 4hr trendline extreme, since let’s not forget that we are also seeing price test daily supply at the moment as well (see above).

However, before we commit to a sell position here, we would need to see lower timeframe confirmation. Should a sell signal be spotted, keep a close eye on the 4hr demand area circled in green at 17986-18014, although we do not think this zone will stop prices from hitting the lower 4hr trendline extreme, it may push price back up to retest your entry before continuing south, taking out all those traders who love moving their stops to breakeven too soon!

Our current buy/sell orders:

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

• Sell orders: 18110 [Tentative – confirmation required] (Predicative stop-loss orders seen at: dependent on where one confirms this area).

XAU/USD (Gold)

Weekly view: From a weekly timeframe perspective, the trend on Gold is still firmly south, and will remain that way in our opinion until price closes above the weekly trendline extended from the high 1488.0. Current price action, however, shows that price is trading in ‘no man’s land’ between weekly supply at 1223.1-1202.6 and a weekly demand area seen at 1130.1-1168.6.

Daily view: Friday’s fakeout which saw prices break below daily demand at 1178.3-1185.8 and rebound from another daily demand at 1159.4-1170.8 (located just within the aforementioned weekly demand area) clearly attracted attention as prices rallied higher on Monday. Assuming that the buyers can continue with this tempo, we may see price challenge the newly-formed daily supply area seen at 1215.0-1204.5.

4hr view: The open 1178.4 saw an immediate bullish reaction, which as you can see, tested and eventually closed above a 4hr supply area coming in at 1185.1-1182.2.

Given that we’re seeing very little resistance on the daily timeframe until 1215.0-1204.5, and the weekly timeframe is also showing room for prices to increase within its current range (see above), our attention will be mostly driven to longs today.

The recent break above the aforementioned 4hr supply created a 4hr demand area seen in green at 1180.4-1183.5. This area of demand is where we believe the overall decision was made by pro money to initially push above the 4hr supply area. Coupled with the fact that the push above this area was relatively aggressive suggests that there may very well be unfilled buy orders left in this 4hr zone. Therefore, should prices reach this area of 4hr demand today; we’re going to be watching the lower timeframe structures for an entry long here. The following reasons explain why we believe it’s best to wait for lower timeframe confirming price action:

1. There could be a fakeout – nothing worse than have your stop taken, then move in your originally anticipated direction.

2. Price could completely ignore this 4hr demand area and continue down to the overall origin of the up move around 4hr demand coming in at 1168.6-1170.8 (located just within daily demand at 1159.4-1170.8).

First take-profit targets will obviously be dependent on how price approaches the current 4hr demand zone. Ultimately though, we’re going to be looking for a move up to the 4hr swap level 1199.1, positioned just below the daily supply area mentioned above at 1215.0-1204.5.

Our current buy/sell orders:

• Buy orders: 1180.4-1183.5 [Tentative – confirmation required] (Predicative stop-loss orders seen at: 1179.9).

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

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