EUR/USD – Large Drop Through Demand
Last night the market fell into the demand zone which formed from yesterday’s move higher, the demand was able to cause the market to move higher for a few hours but this has come to an end today with the market breaking the demand with a big move lower.
You can see how the retracement didn’t actually look that strong, by that I mean no big bullish candlesticks ended up forming when the retracement was taking place, the first sign we had of the retracement coming to an end was when a bearish engulfing candle formed at the open of the London trading session, this proved to be the catalyst for the rest of the move lower as the market never moved back above here in the next few hours.
If you look you can see there was a small 1 hour pause when the NY trading session began, the reason the market paused here was because the bank traders who had placed sell trades during the London session were taking a little bit of profit off their sell trades in order to stop the market falling so the NY traders had the opportunity to get some sell trades placed to make money from the impending move lower. Had the London traders not taken any profits the market would have continued to fall and the NY traders would not have made any money from the big drop.
Two hours later you can see the market spiked back into the price region where this little pause had taken place, this little spike and the subsequent drop which followed was created by the NY traders getting the last of their sell trades placed into the market before the main down move got underway, the bullish candles that have formed these past couple of hours have formed because the London traders who sold this morning are now starting to take profits off their sell trades before the trading day finishes.
Today’s move lower means the current outlook in the market is one of more downside, I think it’s possible that we could now see the market drop all the way down to the 1.10000 level as this is the buy zone where I suspect the banks have got a large number of their buy trades placed, the move up which originated on the 31st I believe is from the bank traders taking profits off sell trades which they placed around the highs of the previous drop. I reckon we’ll see some sort of retracement take place when the market reaches the demand zone found at the lows of this up-move so that might be enough to push the market into any supply zones that may have formed by the time the market has dropped into the lows.
USD/JPY – New High After Move Higher
In yesterday’s post we saw how the market had moved up out of the consolidation and created a demand zone where I said to look for entries long if the market was to return to it.
Although the market has failed to return to demand zone today a second move higher has created another demand zone which we can use to look for an entry long. Overall I think what we’re seeing now is the beginning of a move up back to the highs of the drop which originated from the 105.115 level, for this to be confirmed the supply zone needs to be broken but I doubt it will be broken without first causing some kind of move lower to take place.
Next week watch the two demand zones for entries long, the lower zone is more favorable to cause a reversal but the zone above could also work fine provided you see a decent bullish engulfing candle form inside it.
AUD/USD – Large Drop Breaks Both Demand Zones
In my last post the market had just begun to react to the demand zone which had formed from yesterday’s move higher, that zone ended up being broken a couple of hours later and today we have seen the two other demand zones that formed during the move up which began at the beginning of the week also get broken by a big move lower.
After the market had broken the demand zone that formed yesterday a small pause took place before the price dropped and created a supply zone which I’ve marked in the image. The two other demand zones were then broken and the market is now approaching the lower demand zone which formed back on the 31st August.
I think that ultimately this lower demand zone will end up being broken but not before it causes the market to retrace possibly back up to the supply zone marked on the image or maybe to a supply zone that forms as a result of the market falling into the lower demand, we’ll just have to wait and see what happens next week.