EUR/USD – Consolidating At The Highs
In my last post I talked about how the daily candle could develop into a bearish pin bar if the market continued to fall, a recovery late on Friday helped push the market back up near the highs which lowered the probability of the pin bar working out successfully.
When the market opened last night a drop took place down into the recovery seen on Friday, this drop created a supply zone which has been tested by the market in the past hour. There is also a demand zone which has formed when the market made a sharp move higher earlier this afternoon, if you have taken the supply zone trade you need to be watching for two things.
The first is whether current 1 hour candle stays bearish or turns bullish, if it stays bearish stay in the trade, if it turns bullish i.e the candle closes with a large wick at the end there is a high chance the market will move up past the supply zone.
The second is how the market reacts when it reaches the demand zone. If it breaks the low of the zone its a signs of more downside movement, if the market hits the zone and reacts with big bullish large range candles the market could be on course to move higher past the supply zone.
USD/JPY – No False Breakout, Continued Decline Lower
The breakout from the consolidation we saw last week ended up not being a false break with the market moving lower after my Friday post was published.
Since the market fell from the consolidation we have seen two sets of profit taking come into the market with one being large enough to cause a small pullback. The market is now declining from the pullback and is looking likely to break the daily swing low at the 110.656 level.
If the market manages to break this level it will open up more downside which could take us back to the 109.739 swing high.
AUD/USD – Fallen From The Highs, Lows Close To Being Broken
AUD/USD has fallen down from the highs it was making last week, the market is now in close proximity to the swing lows created last week.
If these swing lows get broken its likely the market will drop down into the demand zone seen at the 0.75165 level. At the moment it doesn’t really look like there are any opportunities to go short, there is a supply zone seen at the top of this current swing down but I would rather want to see the market move a further distance away from the zone before looking for an entry short.
Tomorrow keep an eye on the swing lows, if the market breaks these lows there is a possibility the drop could be accelerated by sell stops which may have accumulated at the lows due to long traders anticipating a move higher.