EUR/USD – Moving Towards Tuesday’s High
The drop through the demand zone we saw yesterday has continued today, but over the past couple of hours a bullish pin bar followed by a large bullish candle has formed and pushed the market up towards the highs made on Tuesday. Although the market hasn’t yet broken through the highs, if things continue as they are now I think it’s likely we’ll see them broken come this time tomorrow.
If the high does get broken, a move up into the supply zone is likely to occur. Watching how the market reacts to this supply zone, is important for figuring out which direction it’s likely to move in in the future. If another big drop out of the zone takes place, it will be a sign that the market is potentially going to reverse back to the downside, as it will form a structure similar to that of which is created when the bank traders get their trades placed to cause the market to reverse. If only a small drop out of the zone take place, we’ll have to wait for more price action to form, because it could mean a big reversal is going to occur but it could also be a sign another move higher is about to happen, so we’ll have to wait what forms when the market reaches the zone.
USD/JPY – Sharp Drop After Making New High
In yesterday’s post we saw the market fall after some profit taking had entered the market. Today we we’ve seen it fall again, but not before it climbed higher and made a higher high in the early hours of this morning.
The drop seen after the market made the higher high has been quite sharp, but at the moment I don’t think that it’s sharp because the bank traders are getting sell trades placed to cause a big reversal to occur. If it continues falling tonight then this belief might change, as usually when the banks are getting trades placed to cause a large reversal, the size of the swings created by them placing trades is much bigger than what we see currently, so we’ll have to see how things develop tonight before deciding on what to do tomorrow.
AUD/USD – Building A Base For A Potential Retracement
The retracement we were seeing yesterday ended up terminating before the market could reach the supply zone where I said to watch for entries short. When it ended it caused the market to fall back to Tuesday’s lows, but it wasn’t actually able to break through the low, and has today moved higher once again.
Over the past few hours it has fallen slightly, so it may be that we see another move down to the current low take place tonight. If a move down does take place and the market fails to break through the low again, I think it will be a good sign we are going to see a large retracement take place next week. If the market drops and actually manages to break through the low, more downside is to be expected over the course of next week.