EUR/USD – Retracement Taking Place
Towards the end of last week we saw the price of EUR/USD drop considerably, now we are seeing a retracement take place which is possibly caused by the banks taking profits off sell trades placed before the drop.
The retracement has caused a demand zone to form. This demand needs to be monitored in case the banks decide to take more profits off their sell trades when the price drops back into the zone. It could be there were not enough sell orders in the market when the price fell and the banks were not able to take the required amount of profit off their sell trades which means they need the price to drop again in order to have enough sell orders come into the market they can use to take profits.
Tomorrow watch the market to see if it drop down into the demand zone. A bullish engulf needs to form in the zone in order for the market to have a decent chance of moving higher so make sure you wait for one to form before placing a buy trade.
USD/JPY – Price Still Rising After Last Friday’s Stop Run
The price of USD/JPY has continued to rise after the stop run we saw take place and the end of last week.
The arrows show all the points where the banks have taken profits off their trades. We can see over the past few hours the banks have taken more profits off their buy trades as evidenced by the bearish engulfing and the small move lower. We need to see a break above the high before going long to make sure the small drop has actually been caused by profit taking rather than the banks establishing sell positions in the market.
No significant technical levels exists at the moment which we could use to get a potential long trade placed. There is a demand zone found on the move up which may cause another move higher in the event of the market returning to it but since the zone was created by profit taking rather than banks placing trades the probability off the zone causing a large move is low.
AUD/USD – More Profit Taking Entering The Market
More profit taking has taken place on AUD/USD at the point where we saw the demand zone form last week.
You must understand the demand zone is not what is caused the price to move up, it’s the banks either taking profits off sell positions or placing buy trades to cause a reversal. At the moment we cant be sure which one it is so we must watch the low marked with an arrow, if the price manages to break past this low and we see multiple candles close below the low, it tells us the up-move is caused by profit taking.
If we see the price fail to move below the low a few more times then its a good signal that the banks could be placing buy trades to make the market reverse.
For now watch to see if any more failures take place and we’ll analyze the situation tomorrow.