Wednesday 11th February: Daily technical outlook and review (Japanese bank holiday today).

EUR/USD:

Weekly Timeframe: The current action on the weekly timeframe shows that the buyers and sellers continue to trade between a weekly supply area coming in at 1.1678-1.1458, and a weekly Quasimodo support level seen at 1.1109.

Daily Timeframe: With very little movement seen on the Euro yesterday, price continues to be supported by a small daily demand area visible at 1.1260-1.1318. In the event that buying is seen from here, we could potentially see prices rally towards a daily decision-point supply area at 1.1678-1.1540 (located deep within the aforementioned weekly supply area). A break lower on the other hand would likely open the door to further downside towards a daily demand area sitting at 1.1045-1.1127, which encapsulates the aforementioned weekly Quasimodo support level.

4hr Timeframe: The 4hr timeframe shows that buying and selling is presently confined to a small 4hr range. Limits can be seen at 1.1343/1.1269 (located within a small daily demand area mentioned above at 1.1260-1.1318).

Buy trades will only be considered once/if price breaks above the current 4hr range and retests it as support. Confirmation from the lower timeframes will be required, and the first target would likely be set just below the 1.1400 handle at 1.1396. With regards to sells, it was previously stated that our team would only be comfortable shorting the Euro if price breaks below and retests 1.1200, since selling on the break of the aforementioned 4hr range may cause unnecessary stress especially with both the 4hr decision-point demand area at 1.1222-1.1253, and the 1.1200 number looming just below.

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 situation on the weekly timeframe remains relatively unchanged, as price is still seen trading just below a weekly swap level coming in at 1.5270. A significant cut above here could effectively open the gates for price to challenge a weekly decision-point supply area seen at 1.5784-1.5541.

Daily Timeframe: The GBP has been seen teasing the 1.5270 weekly swap level for the past two days now, which in our opinion looks poised to break higher judging by the lack of selling interest seen here.

4hr Timeframe: Recent developments on the 4hr timeframe reveal that the 1.5200 handle held the GBP higher yesterday, which consequently saw price break above Monday’s high at 1.5266. Provided that the sellers can hold the market lower here, price could possibly test 1.5200 again sometime today.

As mentioned in the previous analysis, we believe the break above (blue arrow) the 4hr supply area at 1.5318-1.5270 (seen on 05/02/15) to be an important signal, as it has likely caused three things to happen:

1. Consumed the majority of sellers (stopped out).
2. Trapped breakout buyers.
3. Cleared the path north towards the aforementioned daily swap level.

Taking the above into consideration, we feel that the GBP still has potential. Admittedly, price is trading around a weekly swap level resistance (1.5270) at the moment, but looking at how price reacted to this hurdle does not exactly fill us with confidence to begin looking for shorts at this point in time. This coupled with the 4hr timeframe showing direction north (point 3 above), our bias will remain long for the time being.

That being the case, we have placed a pending buy order at 1.5183 just above a 4hr decision-point demand area coming in at 1.5138-1.5178. We believe this area to be where pro money ‘made the decision’ to break above the aforementioned 4hr supply area, therefore we feel that there’s a good chance unfilled buy orders are still lurking here. What is also interesting about this 4hr decision-point demand area is the fact the round number 1.5200 is floating just above it. This will likely be a magnet for price since price already held the market higher here twice before, and with psychological numbers prone to fakeouts, we’re expecting price to do just that – fake below and fill our order before rallying higher as per the green arrows.

Current buy/sell levels:

• Buy orders: 1.5183 (Predicative stop-loss orders are seen at: 1.5133).
• Sell orders: Flat (Predicative stop-loss orders are seen at: N/A).

AUD/USD:

Weekly Timeframe: The AUD/USD pair finished last week defending a weekly demand area seen at 0.7449-0.7678. However, judging from the recently closed weekly candle (indecision), it was clear that both the buyers and sellers were (and still appear to be) hesitant around this zone.

Daily Timeframe: As you can see on the daily timeframe, price action is little bit of a mess at the moment due to the buyers and sellers continuing to battle for position within a daily Quasimodo support area at 0.7699-0.7834. On top of that, Tuesday last week saw price spike lower, likely stopping out a huge amount of traders attempting to fade this daily area. Considering that price is trading from weekly demand (see above) at the moment, we currently believe this ‘spike’ to be a fakeout into the aforementioned weekly demand area which could see higher prices ensue this week.

4hr Timeframe: The 4hr timeframe shows that price did indeed retest the 0.7800 number as support. Our team took a small loss here since we believed we had buying confirmation on the 30 minute timeframe. Following this, price aggressively sold off down towards the 4hr demand area seen at 0.7732-0.7751 which beautifully converges with an ascending 4hr channel support taken from the low 0.7732.

Entering long here is certainly attractive since let’s not forget that we are currently trading around higher-timeframe demand at the moment (see above). Nevertheless, there is potential 4hr resistance looming just above (0.7800) which, if one entered long here, could cause unnecessary drawdown, or worse, completely take you out the market. Our recommendation would be to wait for price to fake below the low 0.7746 (seen clearer on the hourly chart), and then look for a confirmed long entry on say the 30 or 15 minute timeframe, since there would be (dependent on your stop placement) ample risk to reward up to 0.7800 from here.

Current buy/sell levels:

• Buy orders: watching for lower timeframe confirmation around the 4hr demand area at 0.7732-0.7751 (Predicative stop-loss orders seen at: 0.7725).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

USD/JPY:

Weekly Timeframe: With regards to the weekly timeframe, as long as price continues to trade above the weekly swap level at 115.50, our overall bias on the USD/JPY pair will remain long. To the upside, we do not see any ‘heavy’ resistance coming into the market until the price reaches 122.18.

Daily Timeframe: The daily timeframe on the other hand shows that price is currently trading within daily supply (119.95-119.14) at the moment. This area of supply remains a key obstacle to a move towards a drop-base-drop daily supply area seen above at 122.61-121.54, which if you look back to the weekly timeframe, you’ll see it beautifully encapsulates the aforementioned weekly Quasimodo resistance level.

4hr Timeframe: The 4hr swap area at 118.48-118.33 was clearly supportive enough to allow strong buyers into the market yesterday. This saw price rocket north past both the 119.00 level and a 4hr supply area at 119.31-119.12 (located just within the daily supply area mentioned above at 119.95-119.14).

The break above this 4hr supply area is very significant to us, since the path north is now potentially clear up to around the 4hr supply area seen at 120.63-120.39 (located above the daily supply area just mentioned at 119.95-119.14). Therefore, if we bought (since the path is now likely clear), we would effectively be buying into daily supply, right? That is correct, and is something we would usually not consider. However, take a look to the left of current price and see how the aforementioned daily supply area is structured. Notice how it was formed by small pockets of supply that have likely already been consumed by the wicks seen at:119.75/119.86, this likely means that this daily supply area is vulnerable and could easily see a break.

Knowing the above is all well and good, and price may indeed move in our desired direction, but how could one take advantage of this potential rally? Well, for us, we see two areas to watch for buying opportunities:

1. The 119.00 handle. This level will require lower timeframe confirmation since there is very little stopping price from faking lower here.
2. The 4hr demand area at 118.32-118.54. This area is where pro money likely made the decision to break out north, hence there may well be unfilled buy orders left here. For this reason, our team has decided to place a pending buy order at 118.57 with a stop set below at 118.27

The ultimate target for both areas is the 4hr supply area mentioned above at 120.63-120.39 as per the green arrows.

Current buy/sell levels:

• Buy orders: watching for lower timeframe confirmation around 119.00 (Predicative stop-loss orders seen at: dependent on where one confirms this level) 118.57 (Predicative stop-loss orders seen at: 118.27).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

USD/CAD:

Weekly Timeframe: The situation on the weekly timeframe reveals that the market is presently being held lower by the long-term weekly Quasimodo resistance level seen at 1.2765. In the event that further selling is seen, we feel there is a good chance that price will hit a weekly swap level coming in at 1.2260.

Daily Timeframe: The daily timeframe on the other hand shows that from Tuesday onwards (last week), the buyers and sellers have been seen pulling for position around a daily decision-point demand area at 1.2378-1.2468. As you can probably see, this area of demand also remains a key obstacle to a move towards the aforementioned weekly swap level.

4hr Timeframe: Since the 03/02/15, the USD/CAD pair has been seen bouncing between a 4hr swap level visible at 1.2379 (lower limit of the aforementioned daily decision-point demand area), and a 4hr supply area coming in at 1.2643-1.2574. Trading within this band is certainly viable in our opinion (tentative buys seen at 1.2389, and sells at 1.2566), however one should remain vigilant to the fact that fakeouts are very common in ranging environments such as this, so waiting for lower timeframe confirmation is strongly recommended.

A break above the aforementioned 4hr supply area on the other hand would likely force the market to test 1.2700. Selling from here with lower timeframe confirmation is something our team would be interested in taking part in, since let’s not forget that the market is currently being held south at the moment from the major weekly Quasimodo resistance level (see above). Conversely, if price breaks below the aforementioned 4hr swap level, and hits the 1.2300 handle, this level – coupled with the weekly swap level lurking just below it at 1.2260 forms an awesome barrier of support to begin looking for confirmed longs into the market.

Current buy/sell levels:

• Buy orders: 1.2389 (Predicative stop-loss orders seen at: dependent on where one confirms this level) Watching for lower timeframe confirmation around 1.2300/1.2260 (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: 1.2566 (Predicative stop-loss orders seen at: dependent on where one confirms this level) Watching for lower timeframe confirmation around 1.2700 (Predicative stop-loss orders seen at: dependent on where one confirms this level).

USD/CHF:

Weekly Timeframe: Trading action on the weekly timeframe shows that price is currently retesting the weekly swap level at 0.9204 as support. Assuming that the buyers can hold out above this level, resistance will not likely come into the market until price hits the weekly swap level seen above at 0.9382.

Daily Timeframe: Similar to the weekly timeframe, the daily timeframe shows price retesting the weekly swap level at 0.9204. The daily timeframe however shows us that very little buying strength is being seen here at the moment, which could lead to price breaking below this weekly level and opening the gates for prices to challenge a daily decision-point demand area coming in at 0.8933-0.9018.

4hr Timeframe: As you can see, the USD/CHF pair continues to range between a 4hr swap level seen at 0.9316 (remains a key obstacle to a move towards the weekly swap level at 0.9382), and the weekly swap level mentioned above at 0.9204. With the way price is behaving at present, our team has no interest whatsoever in trading this pair.

However, we believe in being prepared, and as such, a break below and retest of the weekly swap level at 0.9204 could provide a nice selling opportunity down towards a 4hr decision-point demand area coming in at 0.8984-0.9054 (located just above the aforementioned daily decision-point demand area). Conversely, a break above the aforementioned 4hr swap level would likely attract further upside towards the weekly swap level seen at 0.9382. It would be at this point we’d feel comfortable looking for confirmed sell trades around the 0.9380 mark.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: 0.9380 [Tentative] (Predicative stop-loss orders seen at: dependent on where one confirms this level).

DOW 30:

Weekly Timeframe: Last week shows price rebounded strongly from the ignored weekly Quasimodo level coming in at 17135. In the event that further buying is seen this week, we feel there’s a very good chance that price will attack the overall high seen at 18098.

Daily Timeframe: The daily picture reveals that the buyers rallied prices higher yesterday, which has, once again, brought the market up to a daily swap level seen at 17896. This level remains a key obstacle to a move towards the small daily supply area seen at 18098-18045.

4hr Timeframe: The recent ascent has seen price break above 17781 and trade back up to the weak-looking 4hr supply area seen at 17934-17855, which if you look on the daily timeframe, you’ll see it beautifully surrounds the daily swap level coming in at 17896.

Overall, we believe the DOW is still heading north. The reason for this is simply because price is showing strength on the weekly timeframe (see above) at the moment, and that the 4hr timeframe recently saw price break above (blue arrow) the 4hr supply area at 17934-17855 on Friday last week, thus likely clearing the path north towards a small 4hr supply area seen at 18047-18014 (located just below the aforementioned small daily supply area). Admittedly, price still has to contend with selling pressure from the daily swap level; and this is why any long trades taken will require strong corresponding lower timeframe confirmation.

With the above in mind, we are currently watching three areas for confirmed buying opportunities:

1. The small 4hr swap level at 17781 (tentative buy orders are seen just above at 17787). Lower timeframe confirmation will be required here since swap levels tend to fakeout often.
2. The 4hr swap level at 17688 (tentative buy orders are seen just above at 17695), this may be a minor level, but it has been able to recently hold price higher which gives this line weight in our opinion. However, like number 1, lower timeframe confirmation will be needed for any buys seen here.
3. The 4hr decision-point demand area at 17561-17617 (tentative buy orders are seen just above at 17625). This area is by far the favorite of the three since it has the added benefit of being located deep within the daily decision-point demand area mentioned above at 17561-17655.

The overall target for the three areas is the 4hr supply area mentioned above at 18047-18014 as per the green arrows.

Current buy/sell levels:

• Buy orders: 17787 (Predicative stop-loss orders seen at: dependent on where one confirms this level) 17695 (Predicative stop-loss orders seen at: dependent on where one confirms this level) 17625 [Tentative] (Predicative stop-loss orders seen at: 17548).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

XAU/USD (Gold):

Weekly Timeframe: Last week saw Gold decrease in value as price closed below a relatively important weekly swap level seen at 1251.5. Consequent to price breaking lower here, one should refrain from getting too excited since potential weekly support is seen coming in just below at 1222.2.

Daily Timeframe: Friday saw a rather aggressive sell off which consequently forced price down towards a daily decision-point demand area seen at 1224.9-1235.7 (sitting just above weekly support at 1222.2). We believe this zone to be significant (even with price showing little buying interest at the moment) since this is likely where pro money made the ‘decision’ to break above the weekly swap level seen at 1251.5.

4hr Timeframe: Recent developments on the 4hr timeframe show that resistive pressure has been seen from a small 4hr ‘kink’ supply area coming in at 1246.6-1245.2.From here, price sold off heavily back down towards the 4hr demand area seen at 1224.9-1232 (located deep within the aforementioned daily decision-point demand area).

Other than what’s mentioned above, not much change has been seen in the Gold markets. Our team however is still watching for lower timeframe buying confirmation around the aforementioned 4hr demand area, but as of yet, no confirmation signal has been seen.

Also, traders may benefit from keeping in mind that just because this 4hr area of demand saw a reaction, it does not necessarily mean it will continue to hold. One NEEDs to be prepared for the possibility that price may fake lower down into the weekly support level coming in just below it at 1222.2 marked in green. This is the primary reason for us requiring lower timeframe confirmation here, as there is nothing worse than price filling your order, stopping you out, and then reversing in your desired direction!

Current buy/sell levels:

• Buy orders: currently watching for lower timeframe confirmation around the 4hr decision-point demand area at 1224.9-1232.1 (Predicative stop-loss orders seen at: dependent on where one confirms this area).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

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