EUR/USD – Reacting To Supply Zone
The sharp move higher we saw take place last Friday has continued today, with the market currently reacting to the supply zone I marked from the move down that occurred at the beginning of last week.
It remains to be seen whether the market will actually reverse at this supply zone. I think we will see a move down take place, but only after the market has moved a little deeper into the zone, this current reaction doesn’t look to me like the beginning of a reversal to the downside. If a move back down to the demand zone does occur, I think that will be a good sign we are going to see a reversal take place once a small retracement has formed from the zone. If only a small move out of this supply zone takes place, it’ll be a signal that we’re probably going to see the market break through the zone and continue moving higher in the following days.
For now I think that it’s a good idea to keep watching for entries short inside the supply zone, because even if only a small drop out of the zone occurs, you’ll still have chance to close your trade before the market breaks through the supply zone.
USD/JPY – Moving Back Towards Current High
Today we’ve seen the market move back towards the high of the sharp drop which took place last Friday. The market hasn’t actually broken through the high yet, but the fact that a large bullish candle formed a couple of hours ago suggests that we could see it broken later on tonight.
If the high of the sharp drop does get broken, it’s likely we’ll see the market move up and probably break through the current high which was made when the market dropped last week. A break above the current high would suggest that a move into the daily sell zone is going to take place if the market is in fact going to reverse, so we’ll have to keep an eye out for entries short if the market enters the zone sometime this week.
AUD/USD – Supply Zone Broken By Move Higher
The little zone I talked about in last Friday’s market commentary did stop the market from dropping lower before the close, which meant that we was today probably going to see another move higher take place.
As you can see from the image, another move has occurred, and the market is currently above the supply zone which caused the drop into the little zone to take place at the end of last week. It’s difficult to say where this move higher is likely to end at the moment. There aren’t really any levels close by which we can use to watch for a reversal to take place, so I think our best bet is to watch the price action for signs that a reversal may be occurring. The drop we’re seeing now may well be the start of a reversal back down to the current low. It’s too early to tell whether it is or not, but I think that if the drop has continued tomorrow, it’s be a good idea to mark a supply zone around the point where it began, as we could see move back into the zone take place before the market really reverses.