A note on lower timeframe confirming price action…
Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:
- A break/retest of supply or demand dependent on which way you’re trading.
- A trendline break/retest.
- Buying/selling tails … essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
- Candlestick patterns. We tend to only stick with pin bars and engulfing bars as these have proven to be the most effective.
We typically search for lower-timeframe confirmation between the M15 and H1 timeframes, since most of our higher-timeframe areas begin with the H4. Stops are usually placed 1-3 pips beyond confirming structures.
EUR/USD
Using a top-down approach this morning, the weekly sellers continue to reflect a strong bearish stance from the underside of a major weekly supply at 1.1533-1.1278. The story on the daily chart, however, shows price has been consolidating between supply at 1.1327-1.1253 and demand drawn from 1.1075-1.1158 since May 22nd. Ideally, bearish strength will not be confirmed until the said demand is taken out. The next downside target in view is the trendline support etched from the high 1.1616, followed closely by support at 1.0850.
Over on the H4 candles, the mid-level number 1.1150 failed to offer much in the way of resistance during yesterday’s trading. This saw price run above Tuesday’s high 1.1164 and end the day forming a near-full-bodied bullish candle. By and of itself, this could encourage further buying up to the 1.12 handle today, which was a level that held beautifully on Monday.
Our suggestions: Technically speaking, 1.12 will likely be next in the firing range today. Before that though, we may see the H4 candles retest 1.1150 as support. Apart from 1.1150 being housed within the aforementioned daily demand, there’s little confluence bolstering this number for a buy trade today. With that, our team’s position will remain flat going into today’s sessions.
Data points to consider: US weekly unemployment claims at 1.30pm, FOMC member Powell speaks at 3pm GMT+1.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: Flat (stop loss: N/A).
GBP/USD
As London buyers entered the fray yesterday, cable rocketed north from the 1.26 handle. The move was exacerbated by comments made by MPC member Haldane, which saw the H4 mid-level resistance at 1.2650 consumed and the 1.27 hurdle challenged. Aside from the fundamental driver here, this recent advance was also likely helped by the daily 161.8% ext. seen at 1.2602 drawn from the high 1.3047, and the 61.8% daily Fib support at 1.2625 taken from the low 1.2365 (small pink zone).
The unit finds itself at a rather critical crossroads at the moment. 1.27, as you can see also held firm, which should not really come as a surprise considering that it is positioned nearby a daily resistance pegged at 1.2673. Also worth mentioning is that weekly price shows room to extend down to a trendline support taken from the high 1.2774 that happens to intersect with daily demand seen below the two above said daily Fib levels at 1.2499-1.2543.
Our suggestions: While a great deal of traders will be eyeing the 1.27 handle for shorts today, we’re looking at the H4 supply seen above at 1.2758-1.2728. Not only does it hold a H4 mid-level resistance level at 1.2750, it also boasts a 61.8% H4 Fib resistance at 1.2728 taken from the high 1.2814. Furthermore, the stops planted above 1.27 will help provide the big boys liquidity to sell into! An ideal setup would be for a H4 selling wick to pierce through 1.27 (taking out the stops), attack the underside of the said H4 supply and then close back below 1.27. This would permit a short entry, targeting 1.2650 as an initial take-profit level.
Data points to consider: MPC member Forbes speaks at 7pm. US weekly unemployment claims at 1.30pm, FOMC member Powell speaks at 3pm GMT+1.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: 1.2758-1.2728 ([waiting for a reasonably sized H4 bear candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle’s wick).
AUD/USD
The Australian dollar declined in value for a third consecutive day yesterday. The H4 support area at 0.7571-0.7557 was taken out and is, as we write, being retested as resistance. Beyond here, the next area in the spotlight is a local H4 support pegged at 0.7524, followed closely by a H4 support area at 0.75-0.7512.
On the weekly timeframe, we can see that the unit marginally closed above supply at 0.7610-0.7543 last week. From our perspective right now, last week’s close higher looks as though it was little more than a fakeout. While the weekly and H4 chart are pointing toward possible selling, let’s not forget the daily picture! Price is currently trading within the walls of a support area formed by 0.7556-0.7523, which could very well hold the candles higher.
Our suggestions: Although we would like nothing more than to short this beast, we are not comfortable with the current daily support area! In addition to this, there’s not a great deal of room for the H4 candles to trade lower, given the next hurdle below sits only 30 or so pips away. As such, remaining flat until more conducive price action presents itself is the route we’ve chosen to take.
Data points to consider: US weekly unemployment claims at 1.30pm, FOMC member Powell speaks at 3pm GMT+1
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: Flat (stop loss: N/A).
USD/JPY
The USD/JPY is effectively unchanged this morning, consequently forming a clear-cut daily indecision candle around the underside of a daily resistance area at 111.35-112.37. On the weekly timeframe, we still feel that weekly bears remain in a relatively strong position after pushing aggressively lower from supply registered at 115.50-113.85. We know there’s a lot of ground to cover here, but this move could possibly result in further downside taking shape in the form of a weekly AB=CD correction (see black arrows) that terminates within a weekly support area marked at 105.19-107.54 (stretches all the way back to early 2014).
Despite H4 price recently seesawing around May/April’s opening levels at 111.29/111.41, the pair appears to be forming a rather attractive H4 AB=CD bullish formation (see black arrows) that completes around the 111 handle. Between June’s opening level at 110.83 and the 111 level (green zone), this is an area we expect at least a bounce to be seen. How much of a bounce is difficult to judge, nevertheless, given what we’ve noted on the bigger picture.
Our suggestions: We just cannot justify a buy from 110.83/111 knowing that we are coming from a daily resistance area! With that, we have decided to remain flat for the time being.
Data points to consider: US weekly unemployment claims at 1.30pm, FOMC member Powell speaks at 3pm GMT+1.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: Flat (stop loss: N/A).
USD/CAD
The USD/CAD, as you can see, extended higher and took out the 1.33 handle and nearby March/April’s opening levels at 1.3312/1.3310 during recent trade. Consequent to this, the daily resistance level at 1.3272 was also engulfed and should, technically speaking, now act as support. Also worth mentioning is that weekly action is seen trading from within the walls of demand formed at 1.3223-1.3395.
Our suggestions: With H4 price showing room for the unit to rally up to a resistance area coming in at 1.3374-1.3393, and the higher-timeframe picture indicating further buying is likely on the cards, we are very interested in buying from 1.33/1.3312 today (green zone). Due to the area being rather small, we would advise waiting for a H4 bull candle to form before pulling the trigger. This will help avoid any possible fakeouts that may take shape.
Data points to consider: US weekly unemployment claims at 1.30pm, FOMC member Powell speaks at 3pm. Canadian retail sales at 1.30pm GMT+1.
Levels to watch/live orders:
- Buys: 1.33/1.3312 ([waiting for a reasonably sized H4 bull candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle’s tail).
- Sells: Flat (Stop loss: N/A).
USD/CHF
The green H4 area at 0.9774/0.9750 managed to remain steady amid Wednesday’s segment. This zone is comprised of a H4 resistance level at 0.9774, a H4 AB=CD 127.2% ext. at 0.9760 taken from the low 0.9613, a H4 trendline resistance etched from the low 0.9691 and a H4 mid-level resistance drawn from 0.9750.
Currently, the pair looks poised to challenge the 0.97 handle, which happens to be shadowed closely by June’s opening level at 0.9680. However, should H4 price stabilize at current price and rally today, this could form a H4 AB=CD pattern that could imply a break through the H4 green zone into H4 supply at 0.9825-0.9801. Apart from converging with a H4 AB=CD 161.8% ext. at 0.9807 taken from the low 0.9695 and the round number 0.98, this supply area is also positioned around the upper edge of daily supply marked at 0.9825-0.9786.
Our suggestions: Should price strike the H4 supply area mentioned above at 0.9825-0.9801 today/this week, we would, dependent on the time of day, look to sell from here at market, with stops sited at 0.9827, targeting 0.9750 as an initial take-profit zone.
Data points to consider: US weekly unemployment claims at 1.30pm, FOMC member Powell speaks at 3pm. Gov. board member Maechler speaks at 5pm GMT+1.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: 0.98 (stop loss: 0.9827).
DOW 30
The DOW continued to correct itself yesterday, after price topped at a fresh record high of 21541 on Tuesday. Latest movement has brought the H4 candles down to within striking distance of a H4 demand base penciled in at 21306-21363.
For those who follow our analysis on a regular basis, you may recall that our desk is currently long from 21164. 50% of that position was quickly liquidated at 21234, with the remaining 50% left in the market to run since we intend on trailing this trend long term. The stop-loss order is currently positioned below the said H4 demand at 21298, as we believe this to be the safest area for the time being.
Our suggestions: Should price challenge 21306-21363 today, and is reinforced by a full or near-full-bodied bullish candle, we may look to add to our current position (as per the black arrows) and trail accordingly.
Data points to consider: US weekly unemployment claims at 1.30pm, FOMC member Powell speaks at 3pm GMT+1.
Levels to watch/live orders:
- Buys: 21164 ([live] stop loss: 21298). 21306-21363 ([waiting for a reasonably sized H4 bull candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle’s tail).
- Sells: Flat (stop loss: N/A).
GOLD
In recent hours, we’ve seen the price of gold advance to the upside. Running through offers around April’s opening level at 1248.0, the yellow metal now looks to be on course to test the H4 resistance at 1259.1. Interestingly, this level merges with two H4 trendline resistances taken from lows of 1245.9/1252.9 and a H4 50.0% retracement value at 1260.7. Also noteworthy is that this H4 resistance level is planted just above a daily resistance area pegged at 1247.7-1258.8. And alongside this, we also see that weekly price shows room to extend down to demand at 1194.8-1229.1.
Our suggestions: The confluence surrounding the H4 resistance mentioned above at 1259.1 is, we believe, enough to justify a short position. With that being said, however, we would only consider this a valid sell zone if, and only if, a reasonably sized H4 bearish candle took shape from here. This will help avoid an unnecessary loss and also help sidestep any fakeout that may be seen given that the sell zone (1260.8/1259.1) is relatively small.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: 1259.1 region ([waiting for a reasonably sized H4 bear candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle’s wick).
