DAILY REVIEW 20 January 2016

EU Analysis:

EU: Perspective: Price has tested and broken through the 1.0500 which is simply a monthly low and psychological level with the next pyschological level at 1.0000 and the 0.9900 level being the breakout retest of a reaccumulation structure. December's candle suggests a retracement is in progress. We also note that there are no significant orders/ stops lower until the 1.0000 key level. Bias is still strongly down from a market structure perspective.    

MONTH- The candle is a below average spread (541pips) bull closing 1/3 off the high on low vol>2months. The candle close and volume suggests more upside. 

WEEK- The candle is a below average soread (179pips) doji closing on high vol<1week. The candle close and volume suggests selling absorption and more upside. 

DAY- The candle is a below average spread (79pips) "near" doji closing on low vol>1day. The candle close and volume suggests buying.

Levels of interest: Demand: Daily/Weekly:  1.0000  

Background: The markets as a whole were thrown into a turmoil with uncertainty owing to China's actions in devaluing the Chinese Yuan and consequent stock market downward spiral. Tumbling oil prices with the expected additional supply of Iranian oil also creates further uncertainty.

The Oanda order book shows a majority of net trapped short positions volumes. 

Potential demand stacks:  N.A.

Potential supply stacks: N.A.

Potential long (trapped) stops:  1.0870-1.0860 
Potential short (trapped) stops: 1.0981-1.0990, 1.1004-1.1012, 1.1095-1.1112 

The US data (Building permits and CPI) due out later today will be the catalyst for SM to move. Yesterday, I wrote "SM is likely to test yesterday's low 1.0867 or lower to induce shorts before reversing to last week's high 1.0983 or higher before reversing." SM is likely to continue fading weak shorts to 1.0983 or higher before reversing.

EU long levels: 1.0800-1.0795, 1.0762-1.0740, 1.0700  

EU short levels: 1.0983-1.1000, 1.1060, 1.1105, 1.1208

GU Analysis:

GU: Perspective: GU has closed below April pivot 1.4564. The June close of 1.5701 becomes important as a supply level to overcome for higher prices. The downward bias is still dominant. 

MONTH-  The candle is a below average spread (507pips) bear closing at the low on low vol>1month. The candle close and volume suggests more downside.

WEEK- The candle is an above average spread (352pips) bear closing at the low on high vol<1week. The candle close and volume suggests more downside.
DAY- The candle is an ultralarge spread (211pips) bear closing off the low on average vol>1day. The candle close and volume suggests more downside. 

Demand: Weekly/Daily:  1.4229 Supply: Short term: 1.5574, 1.5600, 1.5619 

The Oanda order book shows extremely thin overall volumes with trapped longs in the majority. Note that the volume across the trapped range is very thin.

Potential demand stacks: Not significant
Potential supply stacks: 1.4400-1.4430

Potential long (trapped) stops:  1.4127-1.4080 (significant volume only)

Potential short (trapped) stops: 1.4235-1.4250, 1.4335-1.4375, 1.4696-1.4712

Volumes are still very thin and it is best to remain on the sidelines. Wait for the potential demand level 1.4229-1.4220

GU long levels:  not applicable

GU short levels: 1.4330, 1.4425, 1.4512, 1.4535, 1.4600

Posted at 2.56 am EST