EUR/USD – Rising Back Towards Today’s High
Yesterday we saw EUR/USD make a sharp drop into the demand zone that had formed from the swing higher which took place on the 16th January. When yesterday’s market commentary was published, it looked as though the market was going continue dropping until the low of the demand zone had been broken, but a couple of hours after my market commentary was released, the market started to move back up towards the supply zone I had marked out with red lines. This move up caused the market to enter the supply zone in the early hours of this morning, and this afternoon we have seen the market fall out of the zone, but so far the drop has been weak and has not really caused any significant down-movement to take place.
I said in yesterday market commentary how the supply zone should only be traded if the market breaks through the low of the demand zone and I still stand by that, because at the moment it doesn’t look like we’re seeing a reversal out of the daily supply zone take place. Really another sharp drop needs to occur when the market reaches the highs of the supply zone, that would give more confirmation the banks are getting sell trades placed to make the market reverse and would probably give us a more defined area we can use to look for entries into short trades.
For the moment I suggest staying out of the market until more price action has formed, there isn’t any point in trying to get long or short trades placed at the minute because there just isn’t enough evidence to determine which direction the market is going to move in.
USD/JPY – Falling Back To Demand Zone
The move out of the daily demand zone we saw begin yesterday has stalled slightly today, with the market failing to break to new highs after returning to the upper demand zone that formed as a result of the move higher taking place. At the moment the market is actually falling back towards the demand zone but we’ll have to see whether this fall continues all the way to the end of the current hour.
If we do see the fall continue, and the market ends up dropping through the demand zone created yesterday into the daily demand zone below, you need to watch the bottom demand zone for an entry long, as it’s still very possible we could be seeing the beginning of a deep pullback take place. If that’s the case we really don’t want to miss out on an entry long as the potential profit to be made from a move higher out of this demand zone would be huge, so make sure to keep an eye on the zone next week.
AUD/USD Another New High
Today we have seen another new high form on AUD/USD. Similar to yesterday’s high, today’s high has not broken the previous high by a large distance, which is a possible sign we are going see some down-movement take place before the next swing higher occurs.
I think if we do see a bigger move down develop next week, the market will probably reverse once it’s reached the lower demand zone seen in the image above. The demand zone closest to the current market price will probably cause a reaction to take place once it’s reached, but not one which will push the market back up above the new high made today, so just be aware of that if we see a move down occur on Monday.