EUR/USD – Reversal In Progress
In the past few hours we have seen EUR/USD fall out of the daily supply zone it first entered on the 22nd of September. It’s now looking like we are going to see the market fall into the daily buy zone which has caused this entire move up to take place.
The drop out of the daily supply zone pretty much confirms the banks got sell trades placed at the two swing highs we have seen form over the past couple of days. Even though two swing highs have already formed, I think it’s likely we’ll see another form before the market drops into the daily buy zone so make sure to be on the lookout for entries short around the supply zone created by today’s drop, because if another swing is going to form, it will do so around the point where this supply zone has been created. When the market drops into the daily buy zone expect a retracement to begin from somewhere inside the demand zone that’s found within. I don’t think this retracement will last too long and I expect it to come to an end at a price close to where the market is right now.
I think overall once the retracement from the daily buy zone is over, we’ll see the market fall through the daily buy zone and head down towards the daily demand zone found at the 1.11000 price level. At this point I think another reaction will take place but I’m not sure where it will terminate based on the current price action we have seen form in the market.
USD/JPY – Holding At The 100.000 Level
Early this morning USD/JPY rose out of the demand zone it entered yesterday and proceeded to move into the area I said to watch for a reversal in my previous market commentary.
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With EUR/USD now reversing back to the downside I don’t think it’ll be long before we see USD/JPY begin moving higher again. The 100.000 level is a really important big round number so there’s likely to be a lot of buy interest from the bank traders who want to keep the market from breaking through this level.
If we look at Oanda’s order graph we can see a lot of sell stops are building up around the 100.000 level. I think if the market is going to reverse we’ll see a spike down into these sell stops take place first as it will allow the bank traders to get a significant number of their buy trades placed before market actually reverses.
For now just keep monitoring the market for entries long, if you do decide to place a trade before the stop run occurs make sure you put your stop loss below the point where the sell stops have accumulated otherwise you run the risk of the market hitting your stop and taking you out of what could potentially be a very profitable trade.
AUD/USD – Supply Zone Broken
Today the supply zone we expected to be broken in yesterday’s market commentary has been broken, and the market is now in the process of falling after it entered the daily sell zone.
Based on the way the market has fallen out of the sell zone, I don’t believe this drop is a full on reversal. I think we’ll see the market make another move higher into the sell zone before the reversal actually takes place. I would say that if the market does in fact start moving back up, watch for a large bearish engulfing candle to appear when the market breaks through the high of today’s drop out of the sell zone as that would be a good sign the banks getting more sell trades placed to make the market reverse.