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.

EUR/USD

During the course of Monday's sessions, the single currency clocked highs of 1.0740 a few hours after the open and then rapidly turned course, falling sharply against its US counterpart throughout the London morning segment. Breaking below the 1.07 handle and a neighboring H4 trendline support extended from the low 1.0340, the pair attacked a H4 Quasimodo support at 1.0621 and once again, this time going into the US open, hit the brakes and changed course, driving prices back up to the 1.07 region by the closing bell.

Daily demand at 1.0589-1.0662 remains firm, but, as you can see, has so far be unable to lift the unit above the nearby daily resistance at 1.0710. This could have something to do with the fact that weekly action recently rebounded from a long-term weekly trendline resistance stretched from the low 0.8231.

Our suggestions: From our point of view, the EUR could potentially selloff from its current location. The 1.07 level, coupled with a H4 trendline resistance (1.0340) which is supported by weekly structure is sufficient enough to validate a sell, in our humble opinion. However, trading from this level does not come without risk given that the daily candles are presently bolstered by daily demand at 1.0589-1.0662. This does not mean we will not be looking to short here, all it means is that we're going to wait for additional confirmation in the form a H4 bear candle before we're confident enough to pull the trigger.

Data points to consider: ECB President Draghi speaks today at 8am. US CB Consumer confidence report at 3pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.07 region ([wait for a H4 bear candle to form before looking to execute a trade] stop loss: ideally beyond the trigger candle).

GBP/USD

The bearish pulse continues to beat in the GBP/USD market this morning. Sterling came under pressure shortly after Sunday's open, falling sharply from a H4 supply zone at 1.2611-1.2589. Several H4 tech supports were engulfed during this downward move, including the H4 demand at 1.2490-1.2531 which is currently being retested as supply. On the condition that this base holds firm, the next H4 support target on the horizon comes in at 1.2427: an interesting H4 level. It's interesting because not only does it fuse beautifully with a H4 AB=CD 161.8% Fib ext., the 1.24 handle and a H4 trendline support taken from the high 1.2432, but it also has additional backing from a daily support area chiseled in at 1.2510-1.2415.

The only grumble we have here is that weekly price is currently selling off from a weekly Quasimodo resistance level at 1.2673, and shows that the next support on tap is 1.2329: the 2017 yearly opening level which converges with the daily demand seen BELOW the current daily support area! Therefore, a bounce is all that should be expected from the above noted H4 supports.

Our suggestions: Supposing that price strikes the 1.24/1.2440 region today (the yellow box), our desk has noted that a buy would only be considered valid if, and only if, a reasonably sized H4 bull candle takes shape from here. The first take-profit target will likely be the 1.25 neighborhood, which is also where we'd strongly advise traders to reduce risk to breakeven.

Data points to consider: US CB Consumer confidence report at 3pm GMT.

Levels to watch/live orders:

• Buys: 1.24/1.2440 region ([wait for a H4 bull candle to form before looking to execute a trade] stop loss: ideally beyond the trigger candle).
• Sells: Flat (stop loss: N/A).

AUD/USD

In recent sessions, we can see that the commodity-linked currency continued to cling to the H4 channel support drawn from the low 0.7449, bidding price to a high of 0.7567 on the day. While H4 structure indicates room to move higher today, at least until the 0.76 boundary/November's opening base at 0.7606, it may be worth noting that the daily candles remain lurking within the walls of a daily supply area coming in at 0.7581-0.7551. On the flip side to this, nonetheless, weekly price happens to agree with the H4 chart, as the candles are currently seen buoyed by the top edge of a weekly support area penciled in at 0.7524-0.7450.

Our suggestions: Based on the above points, an intraday long from the current H4 channel support could be an option, targeting 0.76/0.7606. Lower-timeframe confirmation would be required before we'd consider this trade valid (see the top of this report for more info on confirmation), but unfortunately is absent for now. Therefore, our team will not be considering longs from this region at this time.

In addition to the above, attempting to hold longs beyond 0.7606/0.76 would be a little too risky for our liking, hence only considering the above long an intraday setup, unless of course we happen to see the daily candles CLOSE above daily supply at 0.7581-0.7551.

Data points to consider: US CB Consumer confidence report at 3pm GMT.

Levels to watch/live orders:

• Buys: A long from the current H4 channel support is only considered valid on the basis that a lower-timeframe confirming buy signal is seen (stop loss: dependent on where one confirms this line).
• Sells: Flat (stop loss: N/A).

USD/JPY

US President Trump's decision to halt some immigration revived demand for the safe-haven yen yesterday. Following an upward rejection of December's opening level at 114.68 going into the London session, the USD/JPY collapsed, wiping out the 114 psychological handle and clocking lows of 113.44 on the day.

As we write, the weekly candles are seen hovering mid-range between weekly resistance at 116.08 and a weekly support area formed at 111.44-110.10. Meanwhile, down on the daily timeframe, price recently sold off from daily supply at 115.62-114.60 and looks to be on course to test daily demand at 111.35-112.37, shadowed closely by a daily broken Quasimodo line at 110.58.

Our suggestions: Right now, we do not see much room for maneuver. Yes, the 114 handle could be retested as resistance today, but this base lacks any noteworthy confluence, in our opinion. Similarly, the H4 support at 113.25 also has little to offer regarding converging structure.

The only area that really jumps out to us this morning is the H4 demand at 112.05-112.37. With the understanding that this H4 demand base has the backing of not only the current daily demand, but also the weekly support area as well, there's a fair chance that price will respond from here. While this may be true, traders still need to be prepared for the possibility of a fakeout through this zone, as price may want to drive deeper into the above noted higher-timeframe areas before rallying higher. With that being the case, waiting for at least a H4 bull candle to form may be the better path to take.

Data points to consider: US CB Consumer confidence report at 3pm GMT. Bank of Japan's monetary policy decision. There is no change expected at this meeting, but traders will be closely focusing on the tone of the central bank, while looking for clues to future policy actions.

Levels to watch/live orders:

• Buys: 112.05-112.37 ([a reasonably sized H4 bull candle will need to be seen from here before a trade can be executed] stop loss: ideally beyond the trigger candle).
• Sells: Flat (stop loss: N/A).

USD/CAD

The value of the USD/CAD weakened amid yesterday's trading following a spike to highs of 1.3169. H4 candle action, as you can see, whipsawed through the H4 mid-way resistance at 1.3150 and tapped the upper area of a H4 supply zone coming in at 1.3171-1.3155. This – coupled with a H4 AB=CD approach (see black arrows) that terminated around the 1.3161 mark, was, technically speaking, clearly enough to send the market lower.

However, weekly demand at 1.3006-1.3115 is still very much in the picture, albeit struggling somewhat at the moment. In addition to this, we can also see that there's a nearby daily demand coming in at 1.3006-1.3041 (located around the lower edge of the above noted weekly demand) that happens to fuse with a daily trendline support taken from the low 1.2654.

Our suggestions: With yesterday's downward move aggressively whipsawing through the 1.31 handle, the level appears to be on the verge of giving way. With this, the next notable area below comes in at 1.3029: a H4 Quasimodo support level which happens to be positioned within the two aforementioned higher-timeframe demands. Although the H4 Quasimodo level boasts attractive confluence, we must take into account that price is also nearing the 1.30 mark – a level which is likely watched by the majority of the market. Does this mean we should ignore longs from the H4 Quasimodo formation? No! What it does mean though is that in order to buy from this H4 base, one might (to be on the safe side) want to consider setting stops beyond the 1.30 level as this will likely give the trade room to breathe, since this number is also located just beneath the above noted higher-timeframe demands.

Since we can find no logical area for stop-loss placement beyond 1.30 we'll wait for H4 candle confirmation, before deciding whether or not to buy from here.

Data points to consider: US CB Consumer confidence report at 3pm. Canadian GDP data set for release at 1.30pm along with the BoC Gov. Poloz speaking at around 10.30pm GMT.

Levels to watch/live orders:

• Buys: 1.3029 region ([a reasonably sized H4 bull candle will need to be seen from here before a trade can be executed] stop loss: ideally beyond the trigger candle).
• Sells: Flat (stop loss: N/A).

USD/CHF

For those who read our previous report on the Swissy pair you may recall that our team highlighted the H4 mid-range Quasimodo support level at 0.9948 as a place to consider entering long from. As we can see, the level has so far held firm and is likely to promote further buying in this market today at least up until the underside of the H4 range at 0.9972, followed by parity (1.0000).

Our reasoning behind our confidence in this level, as we mentioned in yesterday's report, simply comes down to the fact that it's positioned nearby the weekly support coming in at 0.9943. Well done to any of our readers who managed to lock in a position from here.

Our suggestions: Other than the H4 level 0.9948, there's not much else to hang our hat on at the moment. With that being the case, unless price retests the above noted H4 level for a second time today (entering long may be possible with the backing of a lower-timeframe buy signal – see the top of this report), we'll remain on the sidelines.

Data points to consider: US CB Consumer confidence report at 3pm GMT.

Levels to watch/live orders:

• Buys: 0.9948 region ([wait for a lower-timeframe confirming setup to form before looking to execute a trade] stop loss: dependent on where one confirms this area).
• Sells: Flat (stop loss: N/A).

DOW 30

On the back of lower oil prices and US President Trump's decision to halt some immigration, US equities fell sharply yesterday. Price blitzed its way through the 20000 mark, as well as the H4 support at 19989 (now acting resistance) and also daily support at 19964, which, as you can see, is currently being retested as resistance. Apart from the H4 trendline support taken from the high 19995, there's very little seen standing in the way of price retesting January's opening level at 19769, which happens to be located a few points above daily support at 19747.

Our suggestions: Unfortunately, we are unable to pin down a lower-timeframe confirming sell setup from the current daily resistance line. Therefore, at least for our desk, we will not be participating in selling from this zone.

Data points to consider: US CB Consumer confidence report at 3pm GMT.

Levels to watch/live orders:

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

GOLD

The US dollar struck the 101.00 level yesterday (see the US dollar index), but was unable to sustain gains beyond this point. This selling pressure bolstered the yellow metal yesterday and lifted price up to a H4 resistance zone coming in at 1198.4-1203.8.

Now, selling from this angle is considered to be a risky play in our book. Not only are the daily candles seen extending higher, following Friday's buying tail that pierced through the lower edge of a daily support area at 1197.4-1187.7, but weekly action is also looking as though it may retest the underside of a weekly trendline resistance taken from the low 1130.1, which is positioned just above this H4 area!

Our suggestions: With the above notes taken on board, our team has no intention in selling from the current H4 resistance area today. We will, however, be watching the H4 candle action should price strike the above noted weekly trendline resistance, as this could provide a nice base in which to short from. Failing this, the next area of interest is the daily supply area at 1220.9-1212.0 that holds a H4 Quasimodo resistance at 1217.5 and converging H4 trendline resistance extended from the low 1187.7 within its boundaries.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Watch the weekly trendline resistance. Should a H4 bear candle form off this line, this is a valid short signal, with stops placed above the trigger candle. 1217.5 region ([this could be an area, dependent on the time of day, one may consider trading without the need for additional confirmation] stop loss: beyond the daily supply at 1220.9-1212.0).

Currency pair GBP/USD

The GBP/USD is in a bearish channel (blue/brown lines) which could be part of a larger complex correction as indicated by the support (green) and resistance (red) trend lines.

The GBP/USD is building an ABC bearish zigzag (orange) within a downtrend channel (brown/blue lines). A break above the 100% Fibonacci level of wave B vs A invalidates the ABC bearish zigzag and indicates a potential bullish breakout scenario above the bearish channel. A break below the support trend line (green) could see price retest the bottom of the channel (blue).

Currency pair EUR/USD

The EUR/USD completed a 2nd wave (blue) as expected near resistance (red) and made one more lower low. The bearish price action however only reached the 100% Fibonacci target of wave 3 vs 1. This could either be explained by the fact that A) price is building an bearish ABC zigzag (not a 123) or price is expanding the wave 3 (blue) via an internal 5 wave (see 1 hour chart).

For the moment the assumption in this 1 hour chart is that the EUR/USD is building a wave 2 (orange) within wave 3 (blue). The invalidation level of this wave count is a break above the 100% Fibonacci level of wave 2 vs 1.

Currency pair USD/JPY

The USD/JPY broke back below the support trend line (dotted blue) and previous top (dotted green) which invalidated a potential bullish 5 wave. The alternative is an ABC (orange) zigzag within a larger wave 4 (purple) correction.

The USD/JPY is building an ABC (orange) bearish zigzag within wave Y (brown).

EUR/USD

Current level - 1.0693

Despite yesterday's rebound after 1.0620 low, my outlook is negative again, for a slide towards 1.0580. Crucial on the upside is 1.0740 high

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.57

The break through 114.10 signals a negative bias with a risk of another test at 115.50 lows. Initial intraday resistance lies at 114.10.

GBP/USD

Current level - 1.2500

My outlook here remains negative, for a slide towards 1.2415 support. Resistance is projected at 1.2540

Daily Pivots: (S1) 140.95; (P) 142.78; (R1) 143.89; More...

A temporary top is in place at 144.77 in GBP/JPY and intraday bias is turned neutral first. As long as 140.74 minor support holds, we'd holding on to the bullish view. That is, corrective fall from 148.42 has completed at 136.44 already. On the upside, above 144.77 will target 148.42 high first. Break there will resume whole rise from 122.46 and target 150.42 long term fibonacci level next. On the downside, however, below 140.74 will turn bias to the downside to extend the pattern from 148.42 with another falling leg, possibly through 136.44.

In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern even. Main focus is on 38.2% retracement of 195.86 to 122.36 at 150.42. Rejection from there will turn the cross into medium term sideway pattern. Though, sustained break will extend the rebound towards 61.8% retracement at 167.78.

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Daily Pivots: (S1) 121.04; (P) 122.08; (R1) 122.72; More...

Intraday bias in EUR/JPY remains neutral as the sideway consolidation from 124.08 extends. Deeper fall cannot be ruled out. On the downside, below 120.54 will target 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39). In that case, we'd expect strong support from there to bring rebound. On the upside, break of 124.08 will extend the larger rally from 109.20 to 126.09 key resistance next.

In the bigger picture, price actions from 109.20 medium term bottom are seen as part of a medium term corrective pattern from 149.76. There is prospect of another rise towards 126.09 key resistance level before completion. But even in that case, we'd expect strong resistance between 126.09 and 141.04 to limit upside, at least on first attempt.

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This week was supposed to be dominated by central banks' decisions, earnings, and economic data from across the globe, but with Donald Trump in office, nothing seems capable of taking the spotlight from the White House.

U.S. stocks suffered their steepest declines so far this year with Dow Jones and S&P 500 both declining 0.6% on Tuesday. Meanwhile operating Asian markets are all in red led by Japanese stocks despite the BoJ upgrading growth estimates for the next two years and as expected keeping monetary policy unchanged.

Trump's executive order, signed on Friday banning Syrian refugees and suspending all nationals from seven countries doesn't by itself cause a major risk to financial markets. He already warned to ban Muslims, build a wall, cancel Obamacare, and tear up trade agreements. The President is just literally implementing his agenda and if we were not taking him seriously then it's our fault.

Whether you like President Trump or dislike him, as an investor you seek opportunities, and markets were rallying on the President's commitments to reduce taxes, deregulate businesses, and repatriate global assets. If these policies are at risk, this is when you should get worried.

Many Democrats intensified their attacks on Trump, meanwhile some Republicans are criticising the immigration order, and the firing of the acting attorney-general Sally Yates for opposing his travel ban is pouring fuel to the fire. The major risk looming now is the breakup of the Republican coalition, although this doesn't seem to be the case for the time being. I believe it's going to be the biggest risk to financial markets in the near future, as we end up with protectionist policies without the implementation of fiscal policies, thus triggering a sharp reversal in stocks worldwide.

Daily Pivots: (S1) 1.4096; (P) 1.4155; (R1) 1.4216; More...

EUR/AUD is staying in the sideway pattern from 1.4025 and intraday bias remains neutral. Price action from 1.4025 are seen as a corrective pattern and thus maintain near term bearishness. On the downside, break of 1.4025 will resume the larger fall from 1.6587 to key support level at 1.3671. We'd expect downside to be contained there to bring reversal. On the upside, above 1.4274 minor resistance will turn focus back to 1.4721 resistance.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a consolidative pattern. 50% retracement of 1.1602 to 1.6587 at 1.4095 was already met. While further fall cannot be ruled out, we'd expect strong support above 1.3671 to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will be the first sign of resumption of up trend from 1.1602 and target retesting of 1.6587 high first.

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For the 24 hours to 23:00 GMT, the AUD rose 0.09% against the USD and closed at 0.7558.

LME Copper prices rose 0.2% or $10.0/MT to $5857.0/MT. Aluminium prices declined 1.1% or $20.5/MT to $1807.0/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7564, with the AUD trading 0.08% higher against the USD from yesterday’s close.

Overnight data revealed that Australia’s NAB business confidence index advanced to a level of 6.00 in December, compared to a level of 5.0 in the previous month. Moreover, the nation’s NAB business conditions index climbed to a level of 11.0 in December, following a revised reading of 6.0 in the prior month.

The pair is expected to find support at 0.7534, and a fall through could take it to the next support level of 0.7505. The pair is expected to find its first resistance at 0.7582, and a rise through could take it to the next resistance level of 0.7601.

Looking ahead, traders would eye Australia’s AiG performance of manufacturing index for January, scheduled to release later tonight.

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

Daily Pivots: (S1) 1.0619; (P) 1.0659; (R1) 1.0682; More...

EUR/CHF's fall continues and intraday bias remains on the downside for 1.0620 support. Decisive break there will confirm resumption of whole fall from 1.1198. In that case, next downside target will be 1.0485 fibonacci level. On the upside, break of 1.0749 resistance is needed to indicate short term bottoming. Otherwise, outlook remain bearish in case of recovery.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Such correction is still in progress. Sustained trading below 38.2% retracement of 0.9771 to 1.1198 at 1.0653 will target 50% retracement at 1.0485. On the upside, break of 1.0897 resistance is needed to confirm completion of such fall. Otherwise, outlook will stay bearish.

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For the 24 hours to 23:00 GMT, the EUR declined 0.3% against the USD and closed at 1.0699.

Macroeconomic data indicated that Germany's preliminary consumer price index (CPI) jumped 1.9% on an annual basis in January, accelerating at its fastest pace in more than three-years, thus providing further evidence to the European Central Bank (ECB) that its loose monetary policy is working. The CPI recorded an advance of 1.7% in the previous month, while markets were expecting for a rise of 2.0%.

Additionally, the Euro-zone's final consumer confidence index was revised up to a level of -4.7 in January, compared to market consensus for the index to remain steady at a level of -4.9, recorded in the preliminary print. In the prior month, the index had registered a level of -5.1. Moreover, the region's economic sentiment indicator unexpectedly advanced to a level of 108.2 in January, hitting its highest level in six-years, highlighting that businesses and consumers across the Euro-bloc are growing confident about the region's growth prospects. In the preceding month, the index registered a reading of 107.8, while investors had envisaged for a steady reading. Also, the region's industrial confidence index increased to a level of 0.8 in January, notching its highest level since June 2011, compared to a revised flat reading in the prior month.

In the US, data revealed that pending home sales rebounded 1.6% MoM in December, surpassing market expectations for a rise of 1.0% and following a drop of 2.5% in the previous month. Further, the nation's personal spending climbed 0.5% in December, in line with market expectations and recording its biggest increase in three months. Personal spending registered a gain of 0.2% in the prior month. Meanwhile, the US personal income advanced less-than-expected by 0.3% in December, compared to a revised rise of 0.1% in the prior month, whereas markets were anticipating personal income to rise 0.4%. Moreover, the Dallas Fed manufacturing business index unexpectedly climbed to a level of 22.1 in January, compared to market expectations of a fall to a level of 15.0. In the previous month, the index had registered a revised reading of 17.7.

In the Asian session, at GMT0400, the pair is trading at 1.0697, with the EUR trading marginally lower against the USD from yesterday's close.

The pair is expected to find support at 1.0630, and a fall through could take it to the next support level of 1.0563. The pair is expected to find its first resistance at 1.0751, and a rise through could take it to the next resistance level of 1.0805.

Going ahead, market participants will keep a close watch on a speech by the ECB President Mario Draghi, along with a string of crucial economic releases in the Euro-zone, consisting of consumer price index for January, unemployment rate for January and 4Q GDP data, scheduled in a few hours. Also, Germany's retail sales for December and unemployment rate for January, will also pique significant amount of investor attention.

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