Wednesday 20th May: Daily technical outlook and review.

EUR/USD:

Weekly view: The weekly timeframe shows that sellers continue to push price south from the weekly supply area at 1.1532-1.1278, resulting in price now trading within a stone’s throw away from a weekly swap level coming in at 1.1051, and at the same time, wiping out any gains the market had picked up last week. Our long-term bias still remains south on this pair and will continue to do so until we see a convincing push above the current weekly supply area.

Daily view: Monday’s rebound from the daily Harmonic Bat reversal zone at 1.1516/1.1376 (located deep within the aforementioned weekly supply area) extended lower yesterday, forcing price to shake hands with the daily support level seen at 1.1143.

4hr view: The Euro’s recent descent took out several 4hr technical areas during its onslaught yesterday. It was only once price met with 4hr demand at 1.1065-1.1125 (positioned just below the aforementioned daily support level) did we see price action stabilize.

The reaction seen from this 4hr demand area during yesterday’s U.S session has so far not given us any reason to consider that buying interest exists here at this point in time. Considering that the market is trading so close to a weekly swap level seen below in green at 1.1051, we feel that this number will act as a magnet to price today and naturally continue driving towards this barrier, which, as you can see converges beautifully with a 4hr trendline extended from the low 1.0519. The green rectangle – placed 10 pips either side of the weekly swap level is where we intend to begin watching for lower timeframe support to hold firm should the market reach this far south today, as buying from this area, in our opinion, is extremely high probability.

Levels to watch/live orders:

• Buys: 1.1034/1.1061 [Tentative – confirmation required] (Predicative stop-loss orders seen at: dependent on where one confirms this area).
• Sells: Flat (Predicative stop-loss orders seen at: N/A).

GBP/USD:

Weekly view: The weekly timeframe shows that price continued to sell off from the weekly supply area at 1.5824-1.5634. This, as you can see, has placed price now firmly in the jaws of a weekly swap area coming in at 1.5551-1.5391. Our long-term bias will remain short on this pair until a convincing close above the aforementioned weekly supply area is seen.

Daily view: From the daily scale, we can see that price aggressively pushed down towards an ignored daily Quasimodo level seen at 1.5478. Ignored Quasimodo levels tend to hold quite well, so it will be interesting to see what the 4hr timeframe has to report…

4hr view: Sterling’s recent descent took out multiple 4hr technical levels during its incursion. It’s only once price collided with the mid-level number 1.5450 (that converges not only with a 4hr trendline extended from the low 1.5088, but also with the 0.50 Fibonacci retracement number), did we see buying interest come into the market. As you can see, the rebound from here managed to close price back above 1.5500, which, at the time of writing, is being retested as support.

Given that price is now trading within overall demand on both the weekly and daily timeframes (see above) at the moment, it’s likely, should 1.5500 hold today, an advance will be seen. That being the case, we are now patiently watching for lower timeframe buying confirmation here. If a buy signal is spotted, our first take-profit target will be the 4hr swap area coming in at 1.5556-1.5580.

Levels to watch/ live orders:

• Buys: 1.5500 [Tentative – confirmation required] (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sells: Flat (Predicative stop-loss orders seen at: N/A).

AUD/USD:

Weekly view: So far this week, we have seen the market sell off from the weekly swap level at 0.8064, erasing any gains the Aussie picked up last week. If the sellers can remain strong here, we might, just might, see price cross swords with the small weekly swap level seen below at 0.7845.

Daily view: As things stand now, the AUD/USD pair recently took out the small ‘kink like’ daily demand area at 0.7944-0.7999, and has slam dunked itself into daily demand just below at 0.7862-0.7927. This area, in our opinion, holds significance. This is where we believe that the overall decision was made to break above the weekly swap level – to do this, it takes deep pockets, and thus unfilled buy orders may very well be lurking within this zone.

4hr view: The recent selling has seen price settle just above a small 4hr demand area. This zone is not only located within daily demand at 0.7862-0.7927, but it also converges nicely with a 4hr trendline extended from the low 1.0781, and the deep Fibonacci retracement number 0.886 – not a bad place to be looking for longs!

With everything taken into consideration, today’s spotlight will be firmly focused on this 4hr demand area. Once, or indeed if price hits this barrier today, we’ll then begin watching for the lower timeframe price action to reinforce our higher timeframe expectation. Should we spot a signal, our first take-profit target will likely be placed around the mid-level number 0.7950. The reason we require confirming price action here is simply because the weekly timeframe shows there is room for price to move further south yet.

Levels to watch/ live orders:

• Buys: 0.7885-0.7902 [Tentative – confirmation required] (Predicative stop-loss orders seen at: 0.7879).
• Sells: Flat (Predicative stop-loss orders seen at: N/A).

USD/JPY:

Weekly view: Although the weekly timeframe shows that buying interest has entered the market from within the weekly demand area at 118.22-119.40, this means very little to us until we see a convincing push above the weekly high 120.83, which in turn will likely see prices challenge the weekly Quasimodo resistance level coming in at 121.76.

Daily view: From this angle, we can see that price has now firmly closed above the daily consolidation zone seen between 120.35/118.62. This move has likely cleared out a ton of sellers who were trying to fade the upper limit of this range, and as a result, has potentially cleared the path north towards the daily supply area seen at 122.01-121..34 (surrounds the aforementioned weekly Quasimodo resistance level).

4hr view: The recent advance seen on the USD/JPY pair took out several 4hr technical levels in the process. It was only once price banged heads with a 4hr Quasimodo resistance level at 120.73 did we see prices attempt to stabilize. From 120.73, the path south looks relatively clear for selling down to at least 120.35 – the upper limit (now support) of the recently broken daily range (120.35). A convincing break above 120.73 on the other hand, would likely confirm that the break above the daily range just mentioned was genuine, and will possibly continue trading higher towards the 121.00 level.

With everything taken on board, the focal point for today will be the 4hr Quasimodo resistance level at 120.73. In the event that we spot a lower timeframe sell signal around this barrier, we’ll consider shorting down to the green buy zone which comprises of the recently broken daily upper range limit at 120.35 and an ignored 4hr Quasimodo level at 120.22. It would be at this point that we’d exit shorts, and begin looking for longs.

Should price break above and retest the 120.73 level, however, this would, in effect, be our cue to shift our attention to begin looking for confirmed longs, with 121.00 in mind as a first take-profit target.

Levels to watch/ live orders:

• Buys: 120.35/120.22 [Tentative – confirmation required] (Predicative stop-loss orders seen at: 120.18).
• Sells: 120.73 [Tentative – confirmation required] (Predicative stop-loss orders seen at: 120.84).

USD/CAD:

Weekly view: Contrary to the bearish price action we’ve recently been seeing around the weekly swap area at 1.2034-1.1870 over the past few weeks, strong buying has recently come into the market.

Daily view: Yesterday’s candle shows that the USD/CAD pair continues to strengthen. In the event that we see further buying today, it’s likely that price will bump into a daily supply area seen at 1.2326-1.2279.

4hr view: The 1.2133 4hr swap level (an area we mentioned to watch for buys yesterday) was clearly of interest to the bigger players. Once Europe opened for business, this pair rocketed north from here consuming the 4hr supply area at 1.2180-1.2165. Shortly after, a push above 1.2200 was seen during London’s morning session. The buying did not stop there, U.S traders joined in the fun until the market hit 4hr supply at 1.2267-1.2242 (located just below the aforementioned daily supply area). With price stuck trading just below 4hr supply at the moment, buying at current prices is certainly out of the question for us, no matter what the higher timeframes are showing (see above).

Given the points made above, we believe one of two things may happen today:

• Price could sell off to retest the 1.2200, if this level holds, the market could see a rally up towards the 4hr Quasimodo resistance level coming in at 1.2279 (assuming most of the sellers are consumed around the current 4hr supply that is), which if you look back to the daily chart, you’ll notice that this is the lower limit of our daily supply zone at 1.2326-1.2279. Should you intend to trade 1.2200 today, be careful, as fakeouts are very common around psychological numbers such as these, which is why it always best to wait for the lower timeframes to confirm buying strength before risking your-hard earned cash.
• The buyers could continue pushing this market north, breaking above the 4hr supply area at 1.2267-1.2242, and testing the 4hr Quasimodo resistance level 1.2279. This level, as we just mentioned above, is also the lower limit of daily supply, so it could be a lovely little zone in which to look for shorts. However, let’s not forget the strength being seen from the weekly swap area (1.2034-1.1870) at the moment, which could effectively violate our 4hr Quasimodo level. Therefore, like above, waiting for the lower timeframes to confirm buying strength here before risking money is the route we will certainly take.

Levels to watch/live orders:

• Buys: 1.2200 [Tentative – confirmation required] (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sells: 1.2279 [Tentative – confirmation required] (Predicative stop-loss orders seen at: dependent on where one confirms this level).

USD/CHF:

Weekly view: Following last week’s strong close below the weekly demand area at 0.9343-0.9180, relatively strong buying interest has so far been seen this week. In the event that the buyers continue to push north from here, price could retest the weekly swap level coming in at 0.9512.

Daily view: From this angle, we can see that price is now trading deep within a daily supply area at 0.9411-0.9336. Should this area be taken out, price will likely hit the daily swap area seen directly above it at 0.9449-0.9545, which incidentally, surrounds the aforementioned weekly swap level.

4hr view: The USD/CHF pair, as you can see, took out not only the 4hr supply area at 0.9296-0.9267, but also the round number 0.9300 and the high 0.9357 (lowest red arrow) – clearly a good day for anyone long yesterday!

The break of the high 0.9357 was incredibly significant to us, since above this number (apart from potential resistance sitting at 0.9400), the path north is likely clear for a rally up to at least 0.9450, or the round number 0.9500 given enough time. Entering long now, however, with 0.9400 in touching distance is not something we’d be confortable taking part in. With this in mind, there are two ways in which we would trade this pair long… The first would be a close above and retest of 0.9400. The second would require a sell off to take place down to 0.9300/0.9296-0.9267, which we believe will likely hold as a strong buy zone.

However, trading long at these levels will likely put you side-by-side with the weekly timeframe which is currently showing room to move up to 0.9512, but, at the same time, also put you against potential selling opposition from the daily supply area at 0.9411-0.9336. Just to be on the safe side here guys, we would recommend waiting for the lower timeframes to prove that buying strength exists at your chosen levels before committing capital.

Levels to watch/ live orders:

• Buys: 0.9300/ 0.9296-0.9267 [Tentative – confirmation required] (Predicative stop-loss orders seen at: 0.9261).
• Sells: Flat (Predicative stop-loss orders seen at: N/A).

US 30:

Weekly view: As far as we’re concerned, as long as the DOW keeps itself above the 18098 hurdle, our long-term bias will remain long.

Daily view: Following the close above 18279 on Monday, price respected this number as support going into yesterday’s session. However, the reaction seen from the buyers here was weak in our opinion. It will be interesting to see what the 4hr timeframe has to say…

4hr view: The view from the 4hr timeframe shows much the same as the daily timeframe… A weak reaction was seen when price retested the recently broken 4hr supply area at 18279-18250 during yesterday’s sessions, but is, however, still holding on in there.

For us to enter long at this area, the following has to take place:

1. Lower timeframe confirming price action is a must on this retest – this could be a trendline break, an engulf of supply or even a candlestick reversal pattern that you favor etc…
2. Time of day is crucial here too. Most big moves will occur in the London/U.S sessions. Therefore, we will not consider a position unless it signals within these time zones.

Levels to watch/live orders:

• Buys: 18279-18250 [Tentative – confirmation required] (Predicative stop-loss orders seen at: 18243).
• Sells: Flat (Predicative stop-loss orders seen at: N/A).

XAU/USD (Gold)

Weekly view: Following the close above the weekly supply at 1223.1-1202.6 last week, the buyers already attempted to trade higher this week, but as you can see failed miserably. Overall, we still believe that the long-term trend on Gold is still firmly south, and will remain that way in our opinion until price closes above the weekly trendline resistance extended from the high 1488.0.

Daily view: The small rebound seen from the fresh daily supply area coming in at 1236.6-1226.9 on Monday extended lower amid yesterday’s session. This move has now firmly placed price deep within the jaws of a daily swap area seen at 1215.0-1204.5.

4hr view: Yesterday’s sessions saw price collectively take out not only the small 4hr demand area at 1221.5-1223.5, but also the 4hr swap level seen below it at 1212.7. It was only when we saw price collapse into a 4hr swap area seen at 1207.3-1204.7 that converges nicely with a Fibonacci 0.50 retracement number, did we see any buying interest.

Buying from this 4hr swap area would very likely give you a clear run of profit up to at least 1212.7. Ideally though, for a better risk/reward, you would want to see price consume this number and trade up to 1221.5-1223.5. By entering long from here, you have the daily swap area at 1215.0-1204.5 backing you, but potential selling opposition from the weekly supply area at 1223.1-1202.6 against you. On that account, we would highly recommend waiting for the lower timeframes to prove buying strength exists at this area before risking capital here.

On the other hand, a violation of the current 4hr swap area today could stimulate a sell off down towards the 4hr swap area seen at 1197.4-1195.3. Should this occur, we’d only enter short here if price retested this area as supply and displayed some sort of sell signal on the lower timeframes. By entering short, you would effectively be trading shoulder-to-shoulder with the weekly timeframe, and at that point (the daily swap area would be taken out likely by then) also trading in line with the daily timeframe as well.

Levels to watch/live orders:

• Buys: 1207.3-1204.7 [Tentative – confirmation required] (Predicative stop-loss orders seen at: 1203.8).
• Sells: Flat (Predicative stop-loss orders seen at: N/A).

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