Wednesday 18th February: Several high-impacting news events could cause wild swings today – remain vigilant!

EUR/USD:

Weekly Timeframe: The weekly timeframe shows price still remains trading between weekly supply coming in at 1.1678-1.1458, and a weekly Quasimodo support level visible at 1.1109. Nevertheless, much of the recent trading action has been seen taking place just below the aforementioned weekly supply area.

Daily Timeframe: The current situation on the daily timeframe reveals that price is tightly capped between a daily demand area at 1.1260-1.1318 and a daily swap level seen at 1.1411.

4hr Timeframe: As you can see, price recently rallied from the small 4hr demand area at 1.1304-1.1318 (located just within the aforementioned daily demand area), which as a result saw price come into contact with the aforementioned daily swap level.

Considering that price is now located around both the weekly supply area and daily swap level (see above) at the moment, shorting this market is what our team are currently focused on. Areas that we have on our watchlist are as follows:

• The daily swap level at 1.1411. Shorting from this level will require lower timeframe confirmation for the simple reason that price could very easily fakeout north towards 4hr supply at 1.1497-1.1462 before dropping lower.
• The 4hr supply area seen just above the aforementioned daily swap level at 1.1497-1.1462. We’ve placed a pending sell order just below here at 1.1457 and a stop just above at 1.1503 since this area remains relatively fresh. However due to the volatility expected today, we’ve only placed half of our normal position at this level, the other half will be entered if/when price confirms this area.

Overall targets for both trades will be around the 1.1337 mark, seen a little above the aforementioned small 4hr demand area.

Current buy/sell orders:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: Waiting for lower timeframe confirmation around the daily swap level at 1.1411 (Predicative stop-loss orders seen at: dependent on where one confirms this level) 1.1457 (Predicative stop-loss orders seen at: 1.1503).

GBP/USD:

Weekly Timeframe: Last week saw the GBP strongly close above a weekly swap level seen at 1.5270. Assuming that the buyers can hold out above here, price will likely test the weekly supply area seen above at 1.5784-1.5541 sometime in the near future.

Daily Timeframe: Following the bearish reaction seen on Monday from the daily swap level at 1.5433, price remained rather neutral yesterday which as a result formed a clear indecision candle. In the event that further selling is seen from here today, price will likely test the weekly swap level coming in at 1.5270.

4hr Timeframe: As we can all see, the GBP/USD continues to show support from 1.5351. Our team still has little interest in buying the GBP here, as we would prefer to look for longs lower down in between the (marked in yellow) 1.5300/1.5270 zone. With that being said, if 1.5351 gives way today (which is highly likely since there are a number of GBP/USD-related news events today) and price is seen retesting this barrier as resistance, we’d definitely consider taking advantage of this shorting opportunity. As long as we have corresponding lower timeframe confirmation, we’d look to short down towards 1.5300 (as per the green arrows), and then switch to looking for buy trades as just mentioned above in bold.

Current buy/sell orders:

• 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: Last week ended with the Aussie forming yet another weekly indecision candle above weekly demand coming in at 0.7449-0.7678. Assuming that the buyers begin showing strength here, a rally higher could well be seen up towards a weekly swap level visible at 0.8064.

Daily Timeframe: The daily picture shows that for the past two weeks, the AUD/USD pair has been seen ranging between two daily swap levels (0.7844 and 0.7691).

4hr Timeframe: The latest coming from the 4hr timeframe reveals that the 4hr supply area seen at 0.7794-0.7768 has been breached and recently retested as demand. Further buying from here could force the market to test the daily swap level seen at 0.7844 sometime today. It would be at this point that our team would begin looking for confirmation to sell around the 0.7840 mark on the lower timeframes. Selling with a pending order here may be a viable strategy to some traders considering this level’s history, but we remain wary owing to the fact that price is hovering above a weekly demand area (see above) at the moment. First take-profit target for any shorts taken from the aforementioned daily swap level will likely be the recently broken 4hr supply area mentioned above at 0.7794-0.7768.

With all the above in mind, traders should also be prepared for the possibility that price may fake north here today up to a small fresh 4hr supply area at 0.7905-0.7881. In the event this occurs, we’d consider, depending on how price approaches of course, entering at market here around the 0.7876 mark, with a small stop placed above at 0.7910.

Current buy/sell orders:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: 0.7840 [Tentative] (Predicative stop-loss orders seen at: dependent on where one confirms this level) 0.7876 (Predicative stop-loss orders seen at: 0.7910).

USD/JPY:

Weekly Timeframe: At the time of writing, the buyers appear to be attempting to breakout north from the symmetrical triangle extended from the high/low 121.83/117.43. In the event that the buyers are successful in their attempt, this could spark further rallying towards a major weekly Quasimodo resistance level seen above at 122.18.

Daily Timeframe: The latest from the daily timeframe reveals that price was unable to close below the daily decision-point demand area at 118.32-119.09. Pro money may have used this area to gather liquidity – sell stops to buy into. Further buying from here will likely force price to attack last Wednesday’s high at 120.47, and if this is taken out, price would then potentially be free to hit a drop-base-drop daily supply area seen at 122.61-121.54 (encapsulates the aforementioned weekly Quasimodo resistance level).

4hr Timeframe: The buyers were certainly in control of this market yesterday; price took out the 119.00 psychological threshold, and hit a 4hr swap level coming in at 119.35.

119.35 is a rather significant level to us for the simple reason that it remains a key obstacle to a move higher up towards 120.00. The team reported that they are not really comfortable selling from 119.35, since potential support is looming just below at 119.00. They are however interested in buying this pair if price closes above 119.35. Buying the breakout though is not something our trading plan permits; it works for some, just not for us. We’d much rather prefer to wait and see if price retests this level as support and then look for lower timeframe confirmation before risking any capital. However, keep in mind that by buying here, you could potentially be buying from weekly sellers who are likely attempting to short the upper limit of the aforementioned symmetrical triangle, so remain vigilant.

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/CAD:

Weekly Timeframe: The situation on the weekly timeframe reveals that the long-term weekly Quasimodo resistance level seen at 1.2765 continues to hold the market lower. In the event that further selling is seen from here, we feel there is a good chance that price will hit the weekly swap level coming in at 1.2260 very soon.

Daily Timeframe: The daily timeframe on the other hand shows that the daily decision-point demand area seen at 1.2378-1.2468 is continuing to provide support to the market at the moment. This area of demand remains a key obstacle to a move towards the aforementioned weekly swap level. It will be interesting to see what the 4hr timeframe has to say about this…

4hr Timeframe: Yesterday saw the Loonie sell off and hit a 4hr swap level seen at 1.2379 (sits around the lower limits of the aforementioned daily decision-point demand area). We can see that the buyers did attempt to trade higher from here, but consequently found the 4hr supply area above at 1.2489-1.2449 too strong to overcome. Therefore, if price closes below 1.2379, this will likely attract further selling down towards a potential buy zone colored in green, which comprises of the 1.2300 round number level, and the weekly swap level mentioned above at 1.2260. Does this mean if price closes below 1.2379, we then have to wait for price to hit the aforementioned green zone before looking to trade? Absolutely not. In the event a close lower does occur, our team plans to wait and see if price retests this level as resistance, and if so, begin looking for lower timeframe selling confirmation to short down towards the 1.2300 level. It would be at this point we’d exit our shorts, and look for longs.

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/CHF:

Weekly Timeframe: Following the retest of the weekly swap level at 0.9204 last week, further upside has been seen forcing price to trade around ten pips or so below another key weekly swap level coming in at 0.9382.

Daily Timeframe: (similar to the weekly timeframe) the USD/CHF pair rallied higher yesterday and saw price come within ten pips or so to hitting the weekly swap level mentioned above at 0.9382. In the event that price consumes this level, we then feel there’s a very good chance that further buying will ensue up towards a daily swap level seen at 0.9468.

4hr Timeframe: The latest from the 4hr timeframe shows price broke above the 4hr swap level at 0.9316, which as you can see opened the gates for prices to challenge the weekly swap level above at 0.9382.

Taking into account all of the above, our team has decided to watch for lower timeframe selling confirmation around the 0.9382 weekly swap level. If a sell signal is spotted, we intend to try and ride the wave down to at least the aforementioned 4hr swap level. Conversely, if the market breaks above 0.9382, our team will then patiently wait to see if price retests this level as support, if so, we’ll then try and find an entry on the lower timeframes and attempt ride this baby all the way up to the daily swap level coming in at 0.9468.

Current buy/sell orders:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: watching for lower timeframe confirmation around the weekly swap level at 0.9382 (Predicative stop-loss orders seen at: dependent on where one confirms this level).

DOW 30:

Weekly Timeframe: Following the strong rebound seen two weeks ago from the ignored weekly Quasimodo level coming in at 17135, further extension was also seen last week forcing price to close near its highs at 18010. In the event that further buying is ensues this week, we feel there’s a very good chance that price will attack the overall high seen at 18098 very soon.

Daily Timeframe: Yesterday’s trading action saw the buyers take back control and push the DOW up to a small daily supply area at 18098-18045. If further downside is seen from here, price will likely retest the daily swap level coming in just below at 17896 sometime soon.

4hr Timeframe: It was reported in the previous analysis that if the 4hr swap area at 17952-17911 could support the DOW, we felt that price would likely attack and potentially break above the 4hr supply area seen at 18047-18014 (located just below the aforementioned small daily supply area). As we can all see, this has indeed happened. We also went on to explain what we thought may happen following a break higher… We believe that the market will likely trade to new highs if price breaks above the 4hr supply area at 18047-18014. The reason for this is simple. Take a look above this 4hr supply area to the left, can you see how supply may well already likely be consumed? There are two 4hr supply areas that jump out to us; the first comes in at 18093-18062, and the second at 18061-18046. Both of these areas have already been hit, and with that, some of the selling pressure here likely taken out. Therefore, if strong buyers come into the market today, these small areas of 4hr supply will likely not stand much of a chance.

So, where does this leave us with regards to trading this index? For the time being, we are not interested in selling due to the above. With regards to buying however, we currently see two options. Firstly, waiting for price to close above and retest this 4hr supply area as demand. Secondly, if price sees a retracement back down to the aforementioned 4hr swap area, one could then begin looking for lower timeframe confirmation here since we already have a signal (the break above 4hr supply) that price likely wants to trade higher.

Current buy/sell orders:

• Buy orders: intend to watch for lower timeframe confirmation around the 4hr swap area at 17952-17911 if price retraces this far (Predicative stop-loss orders seen at: 17885).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

XAU/USD (Gold):

Weekly Timeframe: The weekly timeframe shows price has dipped below the weekly swap level at 1222.2, which consequently could attract further selling down towards a weekly demand area coming in at 1166.8-1195.0.

Daily Timeframe: The sell off seen yesterday from the daily decision-point supply area at 1245.8-1233.1 forced price to spike just below a daily decision-point demand area coming in at 1204.4-1216.5. This may well be all that’s needed to clear the path south towards a major daily swap level visible at 1182.0 (located relatively deep within the aforementioned weekly demand area).

4hr Timeframe: It should not really come as much of a surprise to you to find that the 4hr demand area at 1204.4-1210.6 has also been broken, considering that its located deep within the aforementioned daily decision-point demand area. Contrary to the daily timeframe however (see above in bold), the 4hr timeframe shows that if price is indeed going to decline from here, the sellers must consume potential buying opposition from around a 4hr decision-point demand area coming in at 1186.6-1194.3 before Gold can reach the aforementioned daily swap level.

Therefore, assuming (like the daily timeframe) that the break below the aforementioned 4hr demand area has likely cleared the path south, we can, as per the 4hr timeframe expect price to likely reach at least the 4hr decision-point demand area at 1186.6-1194.3. With that being said, before price can move that far south, pro money will likely require liquidity in the form of buy orders to sell into. So, they may buy into the sell stops from below the current 4hr demand, thus attracting further buyers into the market, which in turn pro money will begin selling into in small batches until price reaches 1217.3. It would be at this point that we intend to begin watching lower timeframe confirmation to short down towards the aforementioned 4hr decision-point demand area as per the green arrows.

Current buy/sell orders:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: 1217.3 [Tentative] (Predicative stop-loss orders seen at: dependent on where one confirms this level).

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