EUR/USD – Possible Retracement After Stop Run
A couple of hours ago the market ran into a large percentage of buy stops which had accumulated above the high made early this morning, I now think it’s likely we’ll see some kind of retracement take place over the coming hours as the banks may have used the stop run to take profits off the buy trades which they may have placed at the lows of this current move higher.
If we look at Oanda’s open orders graph we can see the large blue bar just above the 1.1250 level, this bar represents the percentage of buy stops that were found at this level before the market spiked them the hour after.
Looking at the the 1 hour chart we can see the price at which the buy stops are found is around about the point where the high formed during the London trading session this morning. It’s likely the traders saw the bearish pin bar form and placed sell trades as they thought it signaled the beginning of a reversal, the drop which took place immediately after only further confirmed to them that a reversal was, in fact, taking place. The traders who sold are likely to have put their stop loss just above the high the pin as this is where you commonly get taught to put your stop when trading pin bars.
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With the stops now hit a retracement is likely to take place possibly down to the support level I’ve marked in the image. Watch for signs of the retracement ending around this support level, if the price continues to fall through the support the demand zone seen immediately below is next point you want to be watching for entries long as it’s highly likely the banks have got a large number of their buy trades placed here.
USD/JPY – Large Drop Leads To Profit Taking
After suffering a huge drop yesterday USD/JPY dropped even lower just after midnight and has spent the majority of today consolidating as the banks look to take profits off their trades.
As expected the buy zone which formed last week ended up being broken by the move lower that took place just after midnight last night, I don’t think it will be long before we see the market fall into the demand zone created by the move higher on the 26th of Augast. It would be worth watching the market for entries long when it reaches this zone as there is a chance what we are currently seeing is the beginning of a consolidation.
If this is what’s happening then another move up from these lows will end up taking place it’s just a case of getting a long trade executed at the right time to take advantage of it.
AUD/USD – Consolidating At The Highs
We have seen AUD/USD continue to consolidate at the new highs it made after the move higher which took place yesterday.
A large bearish candle entered the market an hour ago so we may see some movement down towards the lows made earlier today or the demand zone which formed because of yesterday’s move higher. Really there isn’t much we can do at the minute I would just monitor the price action that forms if the market is able to fall into the demand zone created yesterday.