EUR/USD – Friday’s Low Broken
Today’s we have seen the market fall and break through the low made last Friday. After Friday’s market commentary was published the market did move up a little but it did not break through the high which it had made earlier in the day, so a move up to the highs of the daily supply zone was unlikely to take place.
Currently the market is reacting to the demand zone that formed during the swing up into the daily supply zone. I don’t think this demand is going to cause a big move higher to occur due to the fact it hasn’t formed as a result of the bank traders placing a large number of buy trades. The buy zone seen at the bottom of the image is the most recent point where the bank traders may have got a large number of their buy trades placed, so I think if we are going to see another move take place it will originate from somewhere inside this area.
Friday’s drop and the drop we have seen today has created a supply zone we can use to look for entries into short trades, but I’d only recommend looking for short trade in this zone if the market continues to drop beyond the demand zone it’s reacting to now.
USD/JPY – New Lower Low
The drop caused by the spike into the sell zone which took place last Friday has continued today, with the market managing to make a new lower low a couple of hours ago. This new low and the two lows that formed last Wednesday and Tuesday are still close enough to the lows that formed on the 17th and 23rd of January for them all to have formed as a result of the bank traders getting buy trades place to make the market reverse. If we see a large drop through the new low take place, it would be a strong signal the lows have all formed from the banks taking profits off their sell trades and not because they’re placing buy trades to make the market reverse.
The sell zone which formed last week is still the point you need to be watching for entries short as it’s the most recent place where the bank traders may have got sell trades placed into the market. If they want the price to continue falling, they’ll come into the market and sell again before the highs of the sell zone are broken by a large distance, so keep an eye on the area for entries short if the market moves into the zone later on tonight.
AUD/USD – Inside Demand Zone
The market didn’t end up breaking through the high created by the retracement that occurred once the market entered the daily supply zone last Thursday, instead it began to drop, and that drop has today caused the market to fall into the demand zone which formed at the bottom of the last swing higher.
I don’t think the drop out of the daily supply zone we’re currently seeing is the start of a reversal back down to the daily buy zone, but I’m not comfortable going long at the demand zone because we haven’t seen Thursday’s high broken, which suggests the banks have decided to begin taking some profits off the buy trades they got placed earlier on in the up-move. I think for now the best thing to do is wait for more price action to form. If the market moves up out of the demand zone and breaks through the high mad last week, then the demand zone will become a buy zone which we can use to look for entries into long positions.