DAILY REVIEW 22 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 large spread (143pips) bear closing 2/3 off the low on very high vol>31days. 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 still shows a majority of net trapped short positions volumes. 

Potential demand stacks:  N.A.

Potential supply stacks: N.A.

Potential long (trapped) stops:  1.0677-1.0660 
Potential short (trapped) stops: 1.0916-1.0928, 1.1026-1.1040, 1.1095-1.1112 

The ECB press conference yesterday raises more questions after the ECB's stated willingness to act in view of changing circumstances such as the oil price collapse. The question is of course not whether the ECB would act but rather how they would act and what they would act on? More QE, etc. We saw prices dive 143 pips during the ECB news event. However, prices went back up (retraced) about 120 pips as more weak shorts were taken out. With the bunch of volume still trapped short, SM is likely to remove as many weak shorts as possible by retesting the 1.0915 level or higher before reversing.

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

EU short levels: 1.0915-1.0927, 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 near normal spread (94pips) bull spinning top closing on high vol>30days. The candle close and volume suggests buying. 

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

The Oanda order book shows more trapped shorts with a build up in volume.

Potential demand stacks: Not significant
Potential supply stacks: Not significant

Potential long (trapped) stops:  1.4079-1.4064 (small vol)

Potential short (trapped) stops: 1.4318-1.4385, 1.4412-1.4428, 1.4696-1.4712

The retracement has commenced as anticipated. UK Retail sales due later today may be the catalyst for SM to push north for stops. SM is likely to test the 1.4320 level or higher before reversing.

GU long levels:  1.4100

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

Posted at 11.30 pm EST