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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

The single currency rallied for a fourth consecutive day on Wednesday, resulting in price closing beyond a daily resistance level coming in at 1.1142. With the US dollar index showing little support until we reach the 97.00ish neighborhood, and the EUR without stable resistance until the weekly resistance area at 1.1533-1.1278, we feel further upside will continue to be seen. To take advantage of this potential advance, we're watching for H4 price to retest 1.1142/1.1150: the daily support and a H4 mid-level barrier at 1.1150.

Our suggestions: Following a retest of 1.1142/1.1150, we'd be looking for a reasonably sized H4 bullish candle to take shape, preferably a full-bodied candle. This, for us, indicates buyer interest at a high-probability buy zone. The first take-profit target from here would be the 1.12 handle. Nevertheless, the ultimate take-profit zone for this trade is likely to be set around the underside of the weekly resistance area coming in at 1.1278.

Data points to consider: ECB President Draghi speaks at 6pm. US unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: 1.1142/1.1150 ([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).

GBP/USD

Weighed on heavily by, what seems to be, never-ending selling pressure on the dollar, the GBP advanced higher on Wednesday. This, as you can see on the bigger picture, has lifted the unit up to both a weekly supply area at 1.3120-1.2957, as well as a daily supply zone drawn from within the weekly base at 1.3058-1.2979.

Swinging over to the H4 chart, recent action has formed a rather eye-catching triple top around the 1.2980 vicinity (see the green circle). Although offers seem to be developing here, let's be mindful to the fact that there's a humongous psychological level sitting a mere 20 pips above this resistance at 1.30!

Our suggestions: On account of the above, we believe that the odds of H4 price breaking above the triple-top formation is high. There's likely a truckload of buy stops planted just above these highs, and if we know that, so do smart money. These stops will highly likely provide enough liquidity to fake price to the 1.30 level for a reasonable selling opportunity. Couple all of this with where the instrument is presently trading on the higher-timeframe structure; we believe 1.30 to be a high-probability sell zone.

Because the fakeout will likely be quick and offer little time to secure additional confirmation at 1.30, we would consider entering at market here and targeting the H4 mid-level support at 1.2950 as an initial take-profit zone.

Data points to consider: UK retail sales at 9.30am. US unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: 1.1142/1.1150 ([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).

GBP/USD

Weighed on heavily by, what seems to be, never-ending selling pressure on the dollar, the GBP advanced higher on Wednesday. This, as you can see on the bigger picture, has lifted the unit up to both a weekly supply area at 1.3120-1.2957, as well as a daily supply zone drawn from within the weekly base at 1.3058-1.2979.

Swinging over to the H4 chart, recent action has formed a rather eye-catching triple top around the 1.2980 vicinity (see the green circle). Although offers seem to be developing here, let's be mindful to the fact that there's a humongous psychological level sitting a mere 20 pips above this resistance at 1.30!

Our suggestions: On account of the above, we believe that the odds of H4 price breaking above the triple-top formation is high. There's likely a truckload of buy stops planted just above these highs, and if we know that, so do smart money. These stops will highly likely provide enough liquidity to fake price to the 1.30 level for a reasonable selling opportunity. Couple all of this with where the instrument is presently trading on the higher-timeframe structure; we believe 1.30 to be a high-probability sell zone.

Because the fakeout will likely be quick and offer little time to secure additional confirmation at 1.30, we would consider entering at market here and targeting the H4 mid-level support at 1.2950 as an initial take-profit zone.

Data points to consider: UK retail sales at 9.30am. US unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 0.7450/0.7442 ([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). 0.7481/0.7470 ([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).

USD/JPY

The USD/JPY, as well as US equities, underwent a serious downside correction yesterday. Several H4 tech supports were taken out during the assault, with price recently stabilizing only after reaching the H4 mid-level support at 110.50. As we write, price is seen hovering back above the 111 handle, looking poised to challenge April/May's opening levels at 111.41/111.29.

With weekly flow indicating that the next downside target, apart from the weekly low of 108.13, is the support area at 105.19-107.54, and daily action looking as though it is going to retest the underside of a resistance area at 111.35-112.37, sell trades are favored.

Our suggestions: In view of the two H4 monthly levels converging nicely with the underside of the said daily resistance area, we feel this would be an ideal base for a short today. The only grumble we have is the 111 handle seen below which could act as support and halt selling. Therefore, what we'd like to see is a H4 bearish rotation candle form from 111.41/111.29 that CLOSES below 111. This, for our team, would be a superb signal to short, targeting 110.50 as an initial take-profit area.

Data points to consider: US unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 111.41/111.29 region ([waiting for a reasonably sized H4 bear candle, preferably a full-bodied candle, to form that closes beyond 111 is advised] stop loss: ideally beyond the candle's wick).

USD/CAD

The 1.36 handle, as you can see, has been a bit of a support magnet of late, despite multiple attempts to break lower. This could have something to do with that fact that the USD/CAD is also seen testing a daily support area coming in at 1.3598-1.3559 that holds a weekly support level at 1.3588 within.

To our way of seeing things, trading long at current prices is risky. Not only is there a lot of nearby H4 traffic seen circled in green, but there's also May's opening level at 1.3644, followed closely by the lower edge of the recent H4 range at 1.3650 to contend with.

Our suggestions: The next best option we have, in our opinion, is waiting for a decisive H4 close above 1.3650 to confirm higher prices may be in order. Should this come to fruition and follow up with a retest of this number and a reasonably sized H4 bull candle, preferably a full-bodied candle, we'd look to long this market, targeting the upper edge of the H4 consolidation sited at 1.3750.

Data points to consider: US unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Watch for a H4 close above 1.3650 and then look to trade any retest of this number thereafter ([waiting for a reasonably sized H4 bull candle, preferably a full-bodied candle, to form following the retest before pulling the trigger is advised] stop loss: ideally beyond the candle's tail).
• Sells: Flat (stop loss: N/A).

USD/CHF

H4 demand at 0.9831-0.9857, as you can see, failed to provide support yesterday, forcing the Swissy lower. Following this, price went on to attack the 0.98 handle, which also happened to give way during the later hours of the US segment. This break lower – coupled with higher-timeframe structure could imply further downside is on the cards today. The daily support area at 0.9842-0.9884, which happens to hold the weekly support level at 0.9861 within, was taken out yesterday in strong fashion. In our estimation, this has placed the daily Quasimodo support at 0.9678 in view, followed closely by a weekly Quasimodo support penciled in at 0.9639.

Our suggestions: Given that downside is clearly favored at the moment, we have our eye on trading any retest seen at 0.98. A reasonably sized H4 bearish candle printed from this number (preferably a full-bodied candle) would be enough evidence to short, targeting the 0.97 handle, which sits just above the said daily/weekly Quasimodo support levels.

Data points to consider: US unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 0.98 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).

DOW 30

(Trade update: Took a loss at 20710).

US equities aggressively tumbled lower on Wednesday, as mayhem surrounding the Trump administration shook global markets. H4 price took out several tech supports and ended bottoming just ahead of demand coming in at 20505-20562. As we write, the market is bid and looks poised to challenge the underside of April's opening level at 20669. However, on the other side of the field, daily demand at 20503-20598 was recently brought into the action, which could potentially force the index up to a resistance area drawn from 20714-20821.

Our suggestions: From our perspective, neither a long nor short seems attractive at this time. Buying into a monthly opening level from the daily demand base would not be something we'd look to accommodate. By the same token, selling from this monthly line would be just as risky given the daily demand currently in motion. With that in mind, we'll remain on the sidelines for now and wait for further developments.

Data points to consider: US unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 0.98 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).

DOW 30

(Trade update: Took a loss at 20710).

US equities aggressively tumbled lower on Wednesday, as mayhem surrounding the Trump administration shook global markets. H4 price took out several tech supports and ended bottoming just ahead of demand coming in at 20505-20562. As we write, the market is bid and looks poised to challenge the underside of April's opening level at 20669. However, on the other side of the field, daily demand at 20503-20598 was recently brought into the action, which could potentially force the index up to a resistance area drawn from 20714-20821.

Our suggestions: From our perspective, neither a long nor short seems attractive at this time. Buying into a monthly opening level from the daily demand base would not be something we'd look to accommodate. By the same token, selling from this monthly line would be just as risky given the daily demand currently in motion. With that in mind, we'll remain on the sidelines for now and wait for further developments.

Data points to consider: US unemployment claims at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1268.3-1262.7 ([possible shorts from here if the current H4 candle closes on or very near its lows] stop loss: ideally beyond the candle's wick).

USD/JPY - 111.37

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 111.05

Kijun-Sen level                  : 111.55

Ichimoku cloud top             : 113.11

Ichimoku cloud bottom      : 112.90

Original strategy  :

Sell at 112.50, Target: 111.30, Stop: 112.85

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 112.05, Target: 110.85, Stop: 112.40

Position :  -

Target :  -

Stop : -

As the greenback has finally recovered after falling to 110.53 (just held above 61.8% Fibonacci retracement of 108.13-114.37 at 110.51), suggesting consolidation above this level would be seen and test of the Kijun-Sen (now at 111.55) is likely, however, reckon upside would be limited to previous support at 112.09 and bring another decline, break of said support at 110.51-53 would extend selloff from 114.37 top to 110.25-30 but reckon 110.00 would hold from here.

In view of this, would not chase this fall here and would be prudent to sell dollar on subsequent recovery as 112.05-10 should limit upside and bring another decline. Above 112.25 would defer and risk a stronger rebound to 112.55-60 first.

Global Markets:

• Asian stock markets: Nikkei down 1.50 %, Hang Seng lost 0.30 %, ASX 200 down 1.40 %
• Commodities: WTI Oil at $48.90 (-0.30 %), Brent Oil at $52.00 (-0.30%), Gold at $1260 (+0.15 %), Silver at $16.86 (-0.25 %)

News & Data:

• Australia Employment Change Apr: 37.4k, Est. (5k), Prior (60.9k)
• Australia Unemployment Rate Apr 5.7%, Est. (5.90%), Prior (5.90%)
• New Zealand Consumer Confidence Index (May) 123.9, Prior (121.7)
• New Zealand Consumer Confidence (MoM) May 1.8%, Prior (-2.8%)
• Japan GDP SA (QoQ) Q1 P: 0.5%Est. (0.40%), Prior (0.30%)
• Japan GDP Annualized SA (QoQ) Q1 P: 2.2% Est. (1.80%), Prior (1.20%)

Markets Update:

Another risk-off session as the markets remain worried about the crisis within the White House. US President Trump is facing on-going criticism about his practices, and the recent allegations are the most serious ones so far. It is clear that the planned tax reform will once again have to wait. Trump has plenty of other issues that he has to deal with at the moment.

This led to profit taking in the global equity markets. The SP 500 declined more than one percent, and all the major EU indices fell too. The short-term outlook for the global stock markets has turned negative.

The risk-off sentiment was also present in the FX market. After breaking below a key support level at 113, downside momentum in USDJPY accelerated sharply and the pair declined towards 111. The next important support level now lies at 110. As there are not many near-term catalysts that could support the Dollar, the pair will likely remain under pressure.

Meanwhile, the Euro continues to show strength. Good economic data out of the Euro Zone have been supporting the currency. The outlook looks also bullish from a technical perspective. The next significant resistance level now lies at 113.

While the US Dollar is rather weak, the Australian Dollar failed to benefit much from it. The risk-off theme is weighing on the AUD as well. It would need a clear break above .7450 resistance to change that. AUDUSD could then head towards 0.76.

Upcoming Events:

• 09:30 BST – UK Retail Sales
• 13:30 BST – US Initial Jobless Claims
• 13:30 BST – US Philadelphia Manufacturing Index

USD's slump accelerated as increasing political uncertainty, accompanying disappointing inflation data, has intensified concerns over the country's growth outlook. Four consecutive days of selloff, accumulating loss of over -2%, has sent the DXY index to a 6-month low of 97.33 before recovery. Leading the rally against US dollar was the euro. With removal of one political risk after the French election, the market has turned its attention to the region's economy of which the development have been encouraging. Rebound in inflation and positive sentiment indices have raised speculations that the ECB would add some hawkish twists in its forward guidance. EURUSD has rallied as much as +2.7% over the past 4 trading days. The sustainability of the single currency's strength depends on the tone of ECB and FOMC meeting statements in June.

Former FBI Director James Comey backfired after fired by Trump. He allegedly said in a memo that Trump has asked him to drop the investigation into ex-national security advisor Michael Flynn. As Reuters noted, 'reports that US President Donald Trump had asked then-FBI Director James Comey to end a probe into his former national security adviser have raised questions over whether obstruction of justice charges could be laid against the president”. The case has heightened concerns that political issues might postpone, and raise the difficulty of, the implantation of Trump's economic plan, a theme underpinning the reflation trade of US stocks following Trump's victory in the presidency. Such concern is not without ground. Indeed, Trump's withdrawal of his healthcare plan, after repealing Obamacare, evidenced the internal conflict amongst the Republicans. It is not an easy task to over the dispute and get a bill passed despite its majority in both the House of Representatives and the Senate.

US' inflation has shown signs slowing down. Headline CPI moderated to +2.2% y/y in April, down from +2.4% and +2.8% in March and +2.8% in February, respectively. Core CPI eased for a third consecutive month to +1.9% y/y in April. Yet, it would unlikely alter the Fed's schedule of two more rate hikes this year (market consensus: one in June).

In the Eurozone, euro's rally after the French presidential election was recharged by upbeat economic data. Headline CPI was confirmed at 1.9% y/y in April, marking acceleration from +1.5% a month ago. Core inflation, which excludes energy and seasonal food products, accelerated to +1.2% y/y from +0.8% y/y in March. The economic sentiment strengthened. The ZEW economic sentiment index for the Eurozone jumped +8.8 points to 35.1. For Germany, the biggest economy in the bloc, the reading climbed +1.1 point to 20.6 in May. Yet, the market had anticipated a strong increase to 22. The current situation index soared +3.8 points to 83.9.

The bloc's trade surplus to 23.1B euro in March, beating expectations of, and February's, 18.8B euro. Upbeat macroeconomic data have raised speculations that the ECB might adjust guidance, while maintaining the monetary policy and QE program unchanged, as growth risks are more balanced.

The scenario has presented a policy divergence in favor of the euro in the near-term. With the Fed's two more rate hike almost priced in (bet for a June rate hike dropped), improving economic developments in the Eurozone has narrowed the negative German-US yield spread to a level not seen since November. This has supported the recent euro rally against US dollar.

Yet, whether such support can sustain depends on the June meetings (ECB and FOMC) and upcoming dataflow.

For the 24 hours to 23:00 GMT, the AUD rose 0.07% against the USD and closed at 0.7433.

LME Copper prices declined 0.2% or $9.0/MT to $5575.0/MT. Aluminium prices rose 0.7% or $13.0/MT to $1928.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7453, with the AUD trading 0.27% higher against the USD from yesterday's close, following upbeat Australian jobs report.

Data revealed that Australia's seasonally adjusted unemployment rate registered an unexpected drop to 5.7% in April, dipping to a four-month low level, suggesting that the nation's labour market is strengthening, despite a slowdown in economic growth. Meanwhile, investors had envisaged the unemployment rate to remain steady at 5.9%. Additionally, the nation's consumer inflation expectations dropped to 4.0% in May, compared to a level of 4.1% in the previous month.

Elsewhere, in China, Australia's largest trading partner, the house price index climbed 10.7% on an annual basis in April, after recording a rise of 11.3% in the previous month.

The pair is expected to find support at 0.7406, and a fall through could take it to the next support level of 0.7359. The pair is expected to find its first resistance at 0.7479, and a rise through could take it to the next resistance level of 0.7505.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR rose 0.6% against the USD and closed at 1.1160, after the Euro-zone's final consumer price index (CPI) advanced 1.9% on an annual basis in April, confirming the flash estimates. The CPI had recorded a rise of 1.5% in the previous month.

On the contrary, the region's seasonally adjusted construction output fell 1.1% on a monthly basis in March. In the prior month, construction output had advanced by a revised 5.5%.

The US Dollar declined against its key counterparts, sparked by reports that the US President, Donald Trump, had allegedly asked former FBI Director, James Comey to end his investigation into his former security adviser, Michael Flynn.

On the data front, the US MBA mortgage applications fell 4.1% in the week ended 12 May 2017, following an advance of 2.4% in the prior week.

In the Asian session, at GMT0300, the pair is trading at 1.1155, with the EUR trading slightly lower against the USD from yesterday's close.

The pair is expected to find support at 1.1100, and a fall through could take it to the next support level of 1.1044. The pair is expected to find its first resistance at 1.1191, and a rise through could take it to the next resistance level of 1.1226.

Going forward, market participants will keep a close watch on minutes of the European Central Bank's (ECB) recent monetary policy meeting, slated for release in a few hours. Also, a speech by the ECB President, Mario Draghi will be eyed by traders. In the US, initial jobless claims and Philadelphia Fed manufacturing activity index for May, due to release later in the day, will be on investors' radar.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.4% against the USD and closed at 1.2967, after the latest ILO jobs report highlighted continued strength in the UK labour market.

Britain's ILO unemployment rate unexpectedly fell to 4.6% in the first three months of 2017, marking its lowest level in 42 years, as the number of people employed surged to a record high. Markets expected the ILO unemployment rate to remain steady at 4.7%, recorded in the December-February 2017 period.

However, the nation's average earnings excluding bonus rose 2.1% in the January-March 2017 period, rising at its weakest pace since July 2016, thus indicating that household budgets would certainly be squeezed further in the coming months as wages are not keeping up with inflation. The average earnings excluding bonus had advanced 2.2% in the December-February 2017 period.

In the Asian session, at GMT0300, the pair is trading at 1.2964, with the GBP trading a tad lower against the USD from yesterday's close.

The pair is expected to find support at 1.2915, and a fall through could take it to the next support level of 1.2865. The pair is expected to find its first resistance at 1.3002, and a rise through could take it to the next resistance level of 1.3039.

Moving ahead, investors will look forward to UK's retail sales data for April, set to be released in a few hours.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD declined 1.68% against the JPY and closed at 110.92.

In the Asian session, at GMT0300, the pair is trading at 111.05, with the USD trading 0.12% higher against the JPY from yesterday's close.

Overnight data indicated that Japan's preliminary gross domestic product (GDP) climbed 0.5% on a quarterly basis in the first quarter of 2017, driven by strong exports and robust domestic demand. The nation's GDP had advanced 0.3% in the previous quarter, while market participants anticipated for a rise of 0.5%.

The pair is expected to find support at 110.15, and a fall through could take it to the next support level of 109.26. The pair is expected to find its first resistance at 112.30, and a rise through could take it to the next resistance level of 113.56.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.62% against the CHF and closed at 0.9787.

In the Asian session, at GMT0300, the pair is trading at 0.9792, with the USD trading marginally higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9759, and a fall through could take it to the next support level of 0.9727. The pair is expected to find its first resistance at 0.9837, and a rise through could take it to the next resistance level of 0.9883.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.18% against the CAD and closed at 1.3584.

On the data front, Canada's manufacturing shipments rebounded 1.0% on a monthly basis in March, falling short of market expectations for an advance of 1.3%. In the prior month, manufacturing shipments had fallen by a revised 0.6%.

In the Asian session, at GMT0300, the pair is trading at 1.3606, with the USD trading 0.16% higher against the CAD from yesterday's close.

The pair is expected to find support at 1.3569, and a fall through could take it to the next support level of 1.3532. The pair is expected to find its first resistance at 1.3642, and a rise through could take it to the next resistance level of 1.3678.

With no economic releases in Canada today, investor sentiment will be governed by global macroeconomic factors.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.