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.
For us, lower timeframe confirmation starts on the M15 and finishes up on the H1, since most of our higher timeframe areas begin with the H4. Stops usually placed 5-10 pips beyond your confirming structures.
EUR/USD:
Bolstered by a relatively weak dollar yesterday, the EUR bulls took charge going into the U.S. session and rallied through H4 supply at 1.0903-1.0928 into a H4 resistance area at 1.0937-1.0984. For anyone still long from the H4 Quasimodo zone at 1.0809-1.0826, now may be a good time to think about banking the majority of your position since the single currency could take a more southerly approach today. Not only is price sitting within a H4 resistance area right now, but there’s also a daily resistance level at 1.0955 currently in play, supported by a weekly resistance at 1.0983 lurking within the upper limit of the aforementioned H4 area.
Therefore, from a technical standpoint, we’re expecting a move lower, but, at the same time, are also prepared for a fakeout above to the large figure 1.1000 before this happens. Personally, we’d prefer to wait for the fakeout to occur before trading this pair, since this increases risk/reward dramatically down to target one (H4 demand at 1.0903-1.0928) and also due to the volatile NFP taking center stage later on today!
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: 1.0937-1.0984 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area).
GBP/USD: (Short trade from 1.4078 stopped out at 1.4170).
Reporting directly from the weekly chart this morning, one can see that the broken Quasimodo level coming in at 1.4051 is suffering. However, seeing as how today’s employment data could potentially shake things up before the week’s end, we believe it’s best to wait for the weekly candle to close before making further judgment.
Turning our attention to the daily chart, nevertheless, yesterday’s buying marked the fourth consecutive bullish day for this pair, consequently closing above resistance (now support) at 1.4079 and potentially opening the gates to resistance at 1.4231.
Stepping across to the H4 chart, it’s clear to see once price closed above daily resistance at 1.4079, price found a relatively strong foothold around this number – just look at those buying tails! The day ended with Cable finding resistance at the 61.8% Fibonacci level at 1.4187 just ahead of the 1.4200 figure. Given that 1.4200 has provided this market adequate support and resistance in the past (see arrows), there is a strong possibility of a bounce lower from here. Despite this, we remain on the side of caution due to the NFP set to take the stage later on and the fact that daily action shows room to move higher (see above). As such, our team is humbly going to step aside on this one and reassess following the employment report.
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: Flat (Stop loss: N/A).
AUD/USD:
During the course of yesterday’s sessions, the commodity currency stamped in its third consecutive bullish day, bringing price into the jaws of a H4 Quasimodo resistance level at 0.7363. As can be seen from the chart, price is currently being held lower by this barrier, which is likely due the Aussie also trading from both a weekly supply zone at 0.7438-0.7315 and a firm daily resistance level at 0.7361.
Given the clear structure seen on this pair, we feel shorts are the best course of action to take. However, seeing as we may have missed the boat to trade at market from the H4 level, one could look to enter following a lower timeframe setup, targeting the 0.7300 region first and foremost. Event risks for this setup are of course the heavy-round of U.S. labor figures due out later, so trade cautiously!
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: 0.7363 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this level).
USD/JPY:
Evident from the H4 chart this morning, demand at 113.38-113.06 has so far managed to withstand two bearish attacks from weekly resistance seen overhead at 114.12. Alongside this, we can see that daily action recently printed two back-to-back selling wicks from this weekly level, and still the H4 demand remains strong – does this indicate that strength is entering the market?
At this point, it is still very difficult to tell. It would only be upon a decent-sized close above the weekly level that we could confidently say the bears are weakening. Ahead of today’s NFP release, which will likely stir things up a little bit, we’re expecting price to remain capped between the two current barriers (see above in bold). To that end, we see very little opportunity trade this pair right now.
Areas to keep an eye on during the NFP are as follows:
- H4 supply above at 115.19-114.85. This area held price beautifully back on the 16th Feb, following a fakeout above the aforementioned weekly resistance, so there is a good chance that this process may repeat itself.
- H4 demand at 112.15-112.60, followed closely by the 112.00 figure below. The demand has yet to be visited so this is certainly an area traders will have their eye on today.
Levels to watch/live orders:
- Buys: 112.15-112.60 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area).
- Sells: 115.19-114.85 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area).
USD/CAD:
As we can all see this morning, the Loonie remains afloat above weekly support at 1.3381. In the event that the bulls get their act together here, we could possibly see price cross paths with resistance at 1.3814. Down on the daily chart, two back-to-back inverted pin bars have recently formed above demand penciled in at 1.3293-1.3396, which, as most already know, is a buy signal in itself.
Scanning across to the H4 chart, price once again found support at demand drawn from 1.3358-1.3396 (sits within the above said daily demand). In spite of this, notice that this unit stamped in a lower low going into the American session, suggesting that we’re possibly heading deeper into daily demand. That being the case, our team will be on the lookout for a whipsaw through the current H4 demand to trade long today (see green arrows). This will of course be dependent on the time of day since, from our experience, trading during NFP is unlikely to end in profit.
Levels to watch/live orders:
- Buys: Keep an eye out for a possible whipsaw below 1.3358-1.3396 as there could be a buying opportunity here (see above text for details).
- Sells: Flat (Stop loss: N/A).
USD/CHF:
Mid-way through London trading yesterday the USD/CHF took on a more bearish tone, plowing through support (now resistance) at 0.9949, before finding active bids around the 0.9900 figure. Taking into account that today’s flow will likely be volatile due to the NFP, here are the areas we currently have our eye on:
For shorts:
- There is a possibility, dependent on the news release of course, that a 1:1 Harmonic move could take place up to just above H4 supply at 1.0073-1.0051 (see black arrows). Should this occur traders may also want to take note of the 1.0100 handle above, followed closely by daily resistance at 1.0123.
- Before this H4 supply zone, however, keep parity in mind as a lot of traders will likely be honing in on this figure today!
For longs:
- Daily supports 0.9855 and 0.9822 are levels we are expecting some sort of reaction to be seen. We would not be surprised, especially during NFP, to see price aggressively fake below 0.9855 to collect stops and trade from 0.9822.
We personally will not be trading during the NFP release today, but will certainly be keeping a close tab on the above said areas for a potential intraday trade pre/post NFP.
Levels to watch/live orders:
- Buys: 09855 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this level). 0.9822 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this level).
- Sells: 1.0073-1.0051 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area). 1.0100 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this level). 1.0123 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this level).
DOW 30:
From the H4 chart this morning, we can all see that the buyers and sellers continue to battle for position around supply drawn from 17009-16905. With that being said however, the bulls recently clocked a fresh high at 16952 going into yesterday’s close, suggesting offers may be drying up here.
Despite this, higher-timeframe action currently shows that the DOW recently crossed paths with a minor weekly resistance level coming in at 16935. In the event that this hurdle caves in, all eyes will be on the larger weekly resistance above at 17135. Looking down to the daily chart, there is not much difference being seen other than the fact that the next downside target from the current weekly level on this timeframe comes in around demand at 16625-16435.
To our way of seeing things, one has two options here today. The first, continue watching the lower timeframe action unfold within the current supply. If a sell entry is seen, one could look to trail price to H4 demand at 16427-16518. Secondly, if the bears fail to muster enough strength to defend the above said area, all eyes will then be on the H4 supply just above at 17244-17159 (sits just above the weekly resistance hurdle 17135) for potential shorts. Bear in mind though guys, choppy action is likely ahead with the heavy-hitting NFP due later on today!
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: 17009-16905 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area). 17244-17159 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area).
XAU/USD: (Gold)
Early on into yesterday’s U.S. session the yellow metal catapulted itself northbound, smashing through both the upper limit of the H4 range (1243.5/1226.1) and the H4 resistance level at 1256.2, which is currently being retested as support. Consequent to this recent surge in buying, daily flow is now flirting with supply coming in at 1273.9-1260.2, whilst up on the weekly chart, room is being seen to move higher up to supply seen at 1307.4-1280.0.
In view of the above points, where does one go from here considering today’s action includes the highly volatile NFP release? Well, with the weekly chart showing possibility for a move higher, the H4 support in play could be worth a shot following a lower timeframe buy signal. Failing that, one could look to trade the newly-formed H4 demand below at 1237.2-1243.9 if price should reach this low. Traders want to keep in mind, however, that by entering long from here you’d effectively be buying into daily supply, so remain vigilant and protect your position as soon as logically possible. With regards to shorts today, there is little tempting us to join the sell-side of this market at the moment, since a short from daily supply would place you against both H4 structure and weekly flow!
Levels to watch/live orders:
- Buys: 1256.2 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this level). 1237.2-1243.9 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area).
- Sells: Flat (Stop loss: N/A).
