Thursday 9th November: Technical outlook and review

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Thursday 9th November: Technical outlook and review 1

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/wicks – essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.  

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:   

EUR/USD prices are little changed this morning. Although the H4 candles broke through the 1.16 handle, price was unable to crack the level on a closing basis.

For those who read Wednesday’s report you’ll likely recall that we are currently long this market from the H4 demand area at 1.1541-1.1570. The idea behind selecting this base as a potential buy zone was simply due to the area being positioned over the top of a daily demand area seen at 1.1479-1.1552.

Our buy order was filled at 1.1567, and the stop has been positioned a few pips below the aforesaid H4 demand area at 1.1540. As 1.16 was touched on Wednesday, our first take-profit target, the team decided to reduce risk to breakeven and bank some profits. Ultimately though, a break above 1.16, as well as the nearby H4 supply marked with a red arrow at 1.1616-1.1603, is what we’re looking for going forward, since November’s opening level at 1.1651 is the next take-profit line.

Suggestions: Continue to hold the current buy position. Should you have missed the initial long, you may be given a second opportunity to catch some of the move if H4 price closes above 1.16 and retests it as a support. From here you could drill down to the lower timeframes (see the top of this report) and search for an entry, with your first take-profit objective set at 1.1651.

Data points to consider: EU economic forecasts at 10am; US unemployment claims at 1.30pm GMT.

EUR

Levels to watch/live orders:                             

  • Buys: 1.1567 ([live] stop loss: breakeven).
  • Sells: Flat (stop loss: N/A).

GBP/USD:   

The British pound came under pressure on Wednesday, consequently dragging the unit sub 1.3150 and a tad beneath 1.31. The news of British International Development Secretary Priti Patel failing to declare meetings with Israeli officials revived concerns over the effectiveness of The British PM’s leadership.

Despite the recent downfall, the pair managed to mildly pare losses from the 1.31 neighborhood going into the closing bell. This likely has something to do with the daily trendline support etched from the low 1.2108 currently in play, which is located a few pips above a daily support area at 1.3058-1.2979.

The picture up on the weekly timeframe, nevertheless, promotes more of a bearish tone, unfortunately. Since price cracked through support at 1.3301 at the beginning of October, the weekly candles have been establishing a resistance using this line. And with the next downside target on this scale not coming into sight until we reach demand pegged at 1.2589-1.2759, the bears certainly have room to stretch their legs.

Suggestions: Upside is somewhat blemished by the fact that we have a weekly resistance level in motion, and downside is capped by the aforesaid daily structures. This – coupled with there being little technical confluence seen on the H4 timeframe right now, makes this a difficult market to get involved with right now, in our humble opinion.

Data points to consider: US unemployment claims at 1.30pm GMT.

GBP

Levels to watch/live orders:                             

  • Buys: Flat (stop loss: N/A).
  • Sells: Flat (stop loss: N/A).

AUD/USD:   

Recent trading shows that the H4 candles extended Tuesday’s bounce from support at 0.7632 on Wednesday and ultimately conquered November’s opening level at 0.7659. Assuming that the bulls remain in the driving seat today, the next upside objective can be seen at the 0.77 handle. Beyond here, we’re eyeing the broken Quasimodo line plotted at 0.7743, followed closely by the mid-level resistance 0.7750.

On the weekly timeframe, buyers and sellers remain battling for position within the walls of a demand area coming in at 0.7571-0.7680. In conjunction with the weekly timeframe, there’s a daily demand area also plotted at 0.7571-0.7623 (seen housed within the lower limits of the current weekly demand) that converges with a daily trendline support drawn from the low 0.7328.

Suggestions: With higher-timeframe bulls likely to come into the picture, we have our eye on intraday longs above 0.77 today. A decisive H4 close beyond this number, followed up with a retest as support and a lower-timeframe buy signal (see the top of this report) is, in our book, enough to warrant an intraday play up to at least the 0.7740ish region (the next upside target on the daily timeframe: resistance).

Data points to consider: Chinese inflation figures at 1.30am; US unemployment claims at 1.30pm GMT.

AUD

Levels to watch/live orders:                             

  • Buys: Watch for H4 price to engulf 0.77 and then look to trade any retest of this level seen thereafter ([waiting for a lower-timeframe buy signal to form following the retest is advised] stop loss: dependent on where one confirms this level).
  • Sells: Flat (stop loss: N/A).

USD/JPY:   

Using a top-down approach today, we can see that the weekly candles remain trading around the underside of a supply zone penciled in at 115.50-113.85. Down on the daily timeframe, however, price is seen consolidating ahead of a Quasimodo resistance level planted at 114.95.

In recent sessions, H4 action aggressively whipsawed through November’s opening level at 113.65, touching a low of 113.39, and ending the day closing a few pips ahead of the 114 handle.

Suggestions: You may recall that we were looking for shorts below 113.65 on Wednesday. Without a strong retest to the underside of this level, it was not a high-probability trade, so we passed.

As we write, H4 price is closing in on the 114 handle. Given the position of the market on the weekly timeframe at the moment, the 114 hurdle, the mid-level resistance 114.50 and, of course, the daily Quasimodo resistance level at 114.95 are all potential resistances to keep an eye on today.

Personally, we prefer the daily Quasimodo for shorts, since it is sited within the upper limits of the aforementioned weekly supply and thus allows one to position stops above this zone.

Data points to consider: US unemployment claims at 1.30pm GMT.

JPY

Levels to watch/live orders:                             

  • Buys: Flat (stop loss: N/A).
  • Sells: 114.95 (stop loss: 115.52).

USD/CAD:   

H4 price, as you can see, extended Tuesday’s bounce from the underside of 1.28 on Wednesday, bringing the unit to lows of 1.2715 on the day. This move, technically speaking, was also likely influenced by the fact that weekly price is seen trading beneath resistance at 1.2778 at the moment.

Despite the above noted structure, we do not see much to hang our hat on. According to the weekly and H4 timeframes, waiting for a H4 close to print below 1.27 would be a solid sell signal down to at least 1.26. However, knowing that a sell below 1.27 would almost immediately land one within striking distance of a daily trendline support etched from the low 1.2061 makes this a considerably risky sell, in our book.

Suggestions: On account of the above structure, the team has come to the conclusion that it’d be best to remain flat for the time being.

Data points to consider: US unemployment claims at 1.30pm GMT.

CAD

Levels to watch/live orders:                             

  • Buys: Flat (stop loss: N/A).
  • Sells: Flat (stop loss: N/A).

USD/CHF:  

Much like its bigger brother, the EUR/USD, USD/CHF prices are also little changed this morning. The H4 candles spent the sessions seesawing around parity (1.0000). Given this somewhat lackluster performance, much of the following report will be similar to yesterday’s outlook.

Below parity, the next downside target on the radar is a H4 support penciled in at 0.9940, followed by the 0.99 handle. On the weekly timeframe, we can see that price remains beneath the 2016 yearly opening level at 1.0029, with the next support not coming into view until we reach support at 0.9770. Down on the daily timeframe, the next area of concern is seen a little closer at 0.9896: another support.

Suggestions: Watch for H4 price to print a full or near-full-bodied bearish candle around the underside of parity. Should one manage to secure a sell position from here, the first take-profit target, at least for us, would be 0.9940, and then 0.99. However, seeing as we’re already long the EUR/USD, a sell here would be considered as doubling up on risk given the inverse correlation between the two markets.

Data points to consider: US unemployment claims at 1.30pm; SNB Chairman Jordan speaks at 4.30pm GMT.

SWISSIE

Levels to watch/live orders:                             

  • Buys: Flat (stop loss: N/A).
  • Sells: 1.0000 region ([waiting for a reasonably sized H4 bearish candle to form – preferably a full or near-full-bodied candle – is advised] stop loss: ideally beyond the candle’s wick).

DOW 30:   

The US equity market is effectively unchanged this morning.  With this in mind, the team will continue to eye the point at where November’s opening level at 23392 and the H4 channel support etched from the low 23250 merge (green box) for a possible long trade. As a reminder, in addition to this confluence, we can also see that the monthly opening level fuses nicely with a H4 161.8% Fib extension at 23395 (taken from the high 23622) and is sited within a daily demand base located at 23321-23403. This – coupled with the monstrous uptrend this market is in right now makes for a worthy buy zone, in our humble view. 

Suggestions: Put simply, should the index shake hands with the 23392 neighborhood today/tomorrow, a long from here is certainly worthy of consideration, as stops can be positioned below the noted daily demand at 23319.

Data points to consider: US unemployment claims at 1.30pm GMT.

DOW

Levels to watch/live orders:                        

  • Buys: 23392 region (stop loss: 23319).
  • Sells: Flat (stop loss: N/A).

GOLD:  

Since the 26th October, the gold market has been trading within a phase of consolidation between 1282.5/1265.4. Inside this zone, we have three monthly opening levels: August (1269.3), November (1269.9) and October’s opening level at 1279.1. Also of interest is the fact that this H4 range is bolstered by both a weekly demand at 1251.7-1269.3, and a smaller demand base seen housed within the lower limits of the weekly zone on the daily timeframe at 1251.7-1265.2.

In recent trading, however, we saw the yellow metal breach the top edge of the aforementioned H4 range and clock a high of 1287.2. For H4 price to make its way back into this range, October’s opening level mentioned above at 1279.1 will need to be engulfed beforehand.  Given the recent rotation from the top edge of weekly demand at 1251.7-1269.3, the bulls are likely to hold this bullish tone above 1279.1 today.

Suggestions: Watch for H4 price to challenge 1279.1 and form a reasonably sized H4 bull candle, preferably in the shape of a full or near-full-bodied candle. This, in our view, would be enough evidence to warrant a long trade, targeting H4 resistance at 1288.7 as one’s initial take-profit target.

GOLD

Levels to watch/live orders:                             

  • Buys: 1279.1 region ([waiting for a reasonably sized H4 bullish candle to form – preferably a full or near-full-bodied candle – is advised] stop loss: ideally beyond the candle’s tail).
  • Sells: Flat (stop loss: N/A).

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