EUR/USD – Supply Zone Broken
The supply zone which the market had entered when I published yesterdays post has now been broken after being tested for a second time.
We can see the price failed to continue moving lower after the first test, instead it began moving higher back into the zone where it dropped for a second time although this drop was much much smaller than the drop created by the first test. The drop coincide with the open of the London trading session at 8:00am this is no coincidence because in order for the London traders to be able to place buy trades there must be sell orders coming into the market, the drop gives the London traders these sell orders because it makes people place sell trades.
Once the London traders have placed their buy trades the price moves up and breaks the high of the retracement, giving us a signal that the momentum is now to the upside.
The point we need to be focusing on now is the demand zone created by the London traders placing buy trades. If the bank traders have placed these buy trades with the intention of holding them for a long duration of time they will not let the price break below the point where they have placed them which is the low of the demand zone therefore we need to be watching for signs of them coming into the market and placing more buy trades to make the price move back up again.
USD/JPY – Up-Side Breakout To 106.000 Level
In yesterday’s post I said how it was my belief we’d see an upside breakout today due to the fact we already saw a false breakout take place yesterday.
We can see there was another false breakout which took place a few hours after the first, this false break is likely to have caused more retail traders to place buy trades than the first due to the large bullish candlestick which pushed the price above the highs.
When the breakout fails to take off and the price starts to move in the opposite direction, the traders who went long start being put under pressure to close their trades. Closing a losing buy trades results in a sell order coming into the market, these sell orders are what the banks will use to get their own buy trades placed.
Once their trades are placed the price shoots up to the 106.000 level before pausing as the banks begin to take profits off their buy trades.
AUD/USD – New Highs After Break Of Supply Zone
AUD/USD ended up breaking through the supply zone marked out in yesterday’s post.
Upon making a new low the price started to advance higher up into the supply zone where it then began fluctuating up and down. At one point in it looked like the price was going to fall due to a big bullish candle being engulfed by an equally big bearish candle, the price didn’t end up falling and instead started to rise up past the outer boundary of the supply zone.
From here the market went on a much bigger run higher and is currently still moving up as we speak. For now there isn’t really much we can do in terms of getting a trade placed, its best to wait for some kind of retracement to occur as that would create some levels we can use to look for trade entries.