EUR/USD – Daily Buy Zone Broken
The drop which began after yesterday’s spike higher has continued today, and the market has now completely dropped through the daily buy zone and is heading into the other daily buy zone found below.
No move higher into the supply zone created by the spike occurred yesterday, which meant it would have been difficult to get any sell trades placed to capture today’s continued move lower. With the market now heading into the lower buy zone, I don’t think it will be long before we see a move higher take place that pushes the market into the sell zone seen at the top of the image, or the supply zone created by yesterday’s spike. The daily buy zone is 140pips wide so the market could end up traveling quite deep into the zone before it actually turns and moves back to the upside.
For now you just need to wait until the market has dropped deeper into the zone before looking for entries long. There isn’t really much point in going short at the moment not only because there aren’t any technical levels we can use to get a short trade placed, but because the profit potential of a short trade won’t be that high due to how close the market is to the daily buy zone.
USD/JPY – Rising Out Of Buy Zone
USD/JPY is currently rising up out of the buy zone it moved out of yesterday afternoon, I think if this move up continues we’ll see the market break through the current high and move into the sell zone seen at the 104.500 level.
It was only a couple of hours ago that we saw the market re-enter the buy zone and begin moving out of it again. At the moment it’s looking like this move out of the zone is going to continue and the market is going to break the current high created by today’s drop. If the move does continue the demand zone I’ve marked with the black lines is the point you want to keep an eye on for entries long as the banks may cause the market to fall back into here if they have any additional buy trades left which they need to get placed.
If the move out of the zone doesn’t continue and instead the market falls back into the buy zone, watch the 103.500 and 103.350 levels for signs of a reversal, as looking at Oanda’s order-book reveals that a lot of sell stops have accumulated at both of these levels. It may be that the banks want the market to fall into these stops so they can get a large number of their buy trades placed before the market moves up and breaks through the current high. If this is the case watch for a large bullish engulfing candle to form when either set of stops are hit, I doubt we are going to see this happen today so be on the lookout for it to occur sometime during Monday, if it does in fact end up taking place that is.
AUD/USD – Drop After Retracement
After a small retracement that began around midnight last night, AUD/USD is now in the process of falling back towards the daily demand zone.
The market didn’t return to the supply zone created by the drop out of the daily sell zone but we have had a new supply zone form as a result of the market dropping after the retracement. I don’t think the demand zone below the current market price will cause any significant up-movement to take place, it might cause a small move higher but not one that will last a long time so don’t use it to place any long trades.
As far as entries are concerned I would look for a short trade in the supply zone created by today’s drop. If the market returns to this zone before it’s fallen into the daily demand zone, watch for a bearish engulfing candle to form as it may be the zone which causes the move into the daily demand zone to take place.