Wednesday 4th February: Daily technical outlook and review.

EUR/USD:

Weekly Timeframe: The rebound seen from the weekly Quasimodo support level at 1.1109 has recently extended higher into a weekly supply area coming in at 1.1678-1.1458.

Daily Timeframe: Yesterday’s trading action caused the Euro to break above the daily swap level at 1.1378 and hit a compact daily decision-point supply area seen at 1.1678-1.1540 (located deep within the aforementioned weekly supply area).

4hr Timeframe: The situation on the 4hr timeframe shows that the recent rally in price has taken out multiple resistance barriers in the process. However, the upward momentum seems to be crumbling at the moment as sellers appear to be entering the market around the 1.1500 handle.

Considering that price is currently trading around both weekly and daily supply at present (see above); we’re going to put buy orders on the back burner for time being and concentrate on sells… With that being said, risk/reward parameters restrict us from shorting at 1.1500 with support lurking just below at 1.1458. Ultimately, what we’re watching for is price to break north here and rally towards the combined 4hr supply/Quasimodo resistance area 1.1678-1.1589/1.1637, where we believe two pending sell orders can be set (half the position on each). The first at 1.1582 just below the actual zone itself, and the second set just below the Quasimodo resistance level at 1.1630. Both trades have the same stop-loss location at 1.1690. We feel relatively comfortable shorting here due to all the ducks lining up so to speak, essentially meaning all timeframes in agreement with one another.

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: 1.1582 (Predicative stop-loss orders seen at: 1.1690) 1.1630 (Predicative stop-loss orders seen at: 1.1690).

GBP/USD:

Weekly Timeframe: The weekly timeframe reveals that buying interest is currently being seen from a weekly Quasimodo support level (1.5007) located nicely within weekly demand at 1.4812-1.5097. Further buying from here would likely see price test a weekly swap level looming just above at 1.5270.

Daily Timeframe: Once again price is seen trading around a minor daily supply area coming in at 1.5211-1.5140, this area effectively remains a key obstacle to a move towards the aforementioned weekly swap level.

4hr Timeframe: Like the Euro, the recent rally in price has taken out several technical barriers, and has only recently found resistive pressure just below the 1.5200 handle.

With the weekly timeframe in demand and daily timeframe in supply at the moment, we’re essentially seeing conflicting signals here (see above). Regarding the 4hr timeframe, shorting around 1.5200 on the basis of the aforementioned minor daily supply area may cause unnecessary stress, as you will theoretically be selling into strong-looking weekly demand at 1.4812-1.5097, which is something we have no interest in taking part in (for levels see above).

However, assuming that price can close above 1.5200 and retest it as support, this would be a prime area to begin looking for confirmed buys, since we see very little active selling opposition above until 4hr supply coming in at 1.5318-1.5272 (located around the aforementioned weekly swap level).

Current buy/sell levels:

• 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: The weekly timeframe picture currently shows that price has spiked below a weekly demand area at 0.7699-0.7974 into yet another weekly demand coming in just below at 0.7449-0.7678.

Daily Timeframe: Yesterday saw price spike below a daily Quasimodo support area seen at 0.7699-0.7834, which incidentally was located deep within the weekly demand area mentioned above at 0.7699-0.7974. Assuming that further buying is seen from here, the next area to watch for selling activity comes in around a small daily supply area visible at 0.8050-0.7994.

4hr Timeframe: The recent decline in value (the spike on the higher timeframes) consequently found the mid-number 0.7650 supportive enough to allow the buyers back into play which saw the market rally to around 0.7800.

The information from the higher timeframes show that price may have faked out below the aforementioned daily Quasimodo support area into the weekly demand area mentioned above at 0.7449-0.7678. That being the case, we can likely expect prices to rally higher this week as this may have been a huge hunt for sell stops i.e. liquidity.

In the event price sees a retracement from 0.7800, there are two nice-looking buy zones to keep an eye on:

1. A 4hr Quasimodo support barrier at 0.7718. This level would require lower-timeframe buying confirmation since the 0.7700 round-number level is lurking just below which could induce a fakeout.
2. A potential fakeout zone seen at 0.7625-0.7675. We call it the fakeout zone since it is the deepest area within the overall fakeout seen on the higher timeframe. This zone would probably be good enough for a pending buy order to be set at 0.7681 since there are very likely unfilled buy orders still lurking around this area.

Current buy/sell levels:

• Buy orders: watching for lower-timeframe confirmation around 0.7716 (Predicative stop-loss orders seen at: dependent on where one confirms this level) 0.7681 (Predicative stop-loss orders seen at: 0.7621).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

USD/JPY:

Weekly Timeframe: The weekly timeframe shows price is currently hovering above a major weekly swap level (115.50) at the moment. As long as price continues to trade above here, our sentiment for this pair will remain bullish.

Daily Timeframe: Little price movement on the daily timeframe has resulted in the market forming what looks to be a bullish continuation flag. Overall though, the pair remains trapped between a small daily supply area seen just above at 119.95-119.14, and a daily demand area seen below at 115.55-116.38. It will be interesting to see what the 4hr timeframe has to say about this…

4hr Timeframe: Monday’s open (116.87) saw the market break below the 4hr range (118.84-118.52/116.91-117.22) that has confined price action since 20/01/15. In breaking below here, a second, albeit smaller 4hr range (116.86/117.68) formed (marked in yellow).

This has in effect made it relatively easy to read the price on this pair. A break above and retest of the small 4hr range high would likely attract buying interest up to the upper limits of the larger 4hr range. Similarly, a break below and retest of the small 4hr range low (for levels see above) would likely motivate the sellers to push this market south down towards a 4hr demand area coming in at 115.55-116.06 as per the blue arrows.

With the above in mind, buying the retest is very high probability since we are trading above a higher-timeframe weekly swap level at present (see above). Selling on the other hand is something we would need to be careful of since shorting here could potentially put you in the position of selling into higher-timeframe support (see weekly and daily above), so this trade would require constant monitoring, along with very strict trade management rules.

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: Selling interest is clearly present from the weekly Quasimodo resistance level at 1.2765. Assuming that the sellers continue with this intensity, we feel there is a very good chance that price will hit the weekly swap level at 1.2260 sometime soon.

Daily Timeframe: Yesterday’s trading action saw further selling enter the market consequently breaking below a daily decision-point demand area at 1.2378-1.2468. This could very well mean that major buyers here have been stopped out and the path cleared down towards the aforementioned weekly swap level. It will be interesting to see what the 4hr timeframe has to say about this…

4hr Timeframe: The 4hr timeframe on the other hand shows that the recent decline in value found support around a minor 4hr swap level coming in at 1.2379, which at the time of writing is currently holding the market higher. As you can also see, this level remains a key obstacle to a move towards the aforementioned weekly swap level.

Heavy selling from the weekly Quasimodo resistance level, and a break below a rather large daily decision-point demand area (see above) deters us from buying this market at the moment, even though we see a clear run to the upside (1.2500) from the current 4hr swap level at 1.2379. Ultimately, what we’re looking for is price to close below this level and retest it as resistance; this would essentially be our cue to begin watching the lower timeframe action for sell signals.

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/CHF:

Weekly Timeframe: Recent developments show the USD/CHF pair began the week positively with prices gapping north above a major weekly swap level coming in at 0.9204. As a result, this has likely opened the gates for the market to challenge yet another weekly swap level seen at 0.9382.

Daily Timeframe: The daily timeframe shows that price is currently taking a breather above the weekly swap level at 0.9204. Assuming that the buyers can hold out above this level, we see very little reason why price cannot challenge the weekly swap level seen above at 0.9382.

4hr Timeframe: As mentioned in the previous analysis, the 4hr swap level visible at 0.9316 remains a key obstacle to a move towards the weekly swap level at 0.9382.

From a technical standpoint, our team came to a general consensus that buying is presently more favorable than selling owing to the fact price is trading around higher timeframe support at the moment (see above). As such, we’re watching for lower timeframe buying confirmation around the weekly swap level 0.9204. Provided that we find a suitable entry long here, the first take profit target would be set at 0.9312, a little below the aforementioned 4hr swap level (as per the blue arrows).

Current buy/sell levels:

• Buy orders: Watching for buying confirmation around the 0.9204 mark (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

DOW 30:

Weekly Timeframe: The weekly timeframe shows that for seven consecutive weeks price has been teasing the ignored weekly Quasimodo level seen at 17135. Provided that the buyers can continue to hold the market above this barrier, our overall bias will remain long.

Daily Timeframe: The rebound seen on Monday from the daily demand area at 17032-17186 recently extended higher yesterday forcing the market to test a small daily supply area located at 17698-17649.

4hr Timeframe: The recent ascent caused the market to completely obliterate a minor 4hr Quasimodo resistance level at 17500, and push towards the small 4hr supply area coming in at 17698-17663 (located deep within the aforementioned daily supply area). Our long position from 17119 has been closed here for an absolutely fantastic profit, which literally saw no retracement on the way to the target!

With the weekly timeframe showing price still hanging in there above the ignored weekly Quasimodo level, selling at the 4hr supply area at 17698-17663 (for levels see above) is something we remain hesitant about. Therefore, opting to stand on the lines until further price action develops is very likely the best path for us to take.

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).

XAU/USD (Gold):

Weekly Timeframe: Recent developments on the weekly timeframe show that price is heading back down towards the weekly swap level seen at 1251.5 following a clear break above weekly supply at 1296.3-1269.3.

Daily Timeframe: The daily decision-point supply area seen at 1297.4-1284.3 is currently holding the market lower, and is certainly proving itself as an area of worth; it will be interesting to see what the 4hr timeframe picture looks like…

4hr Timeframe: The 4hr timeframe shows that price spiked a few pips above the 4hr decision-point supply area (marked with a red circle) at 1284.9-1278.1 (located just below the aforementioned daily decision-point supply area), which likely triggered the sell off down towards 4hr support at 1256.7.

We were initially looking for longs based on price closing above weekly supply and then reacting off of the weekly swap level below as support (see above for levels). But, before this could happen we required price to close above the aforementioned 4hr decision-point supply area to clear any sellers out and free the path north towards a 4hr swap level coming in at 1305.2 (between these two levels we see very little active supply – check out the consumption wicks marked with green arrows at: 1292.9/1297.4/1299.0/1299.5), which is conveniently located ABOVE the aforementioned daily decision-point supply area. But as things stand, with no close above the 4hr area we cannot permit a long entry. Therefore, it is back to sitting on our hands and waiting for further price action to develop.

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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