EUR/USD – Both Demand Zones Broken
Both demand zones we were watching for trading opportunities have been broken today.
On the first demand zone we saw the market react in the form of a bullish pin bar but this was soon counteracted by a bearish engulfing candle seen two hours later. The market then made a large drop lower which broke through the second demand zone found just below the first. If you has been using pending orders to trade supply and demand zones its probable you would have lost on this trade.
There was a small move higher when the second zone was broken, this is currently being engulfed lower so we need to keep an eye on if the low of this up-move is penetrated by the market, if it is then its likely the market is going to continue falling into the daily demand zone found 116 pips away from the current price.
Until the market reaches the daily demand I would look for short trades into this downwards momentum, take profit orders for short trades should be placed at the daily demand zone.
USD/JPY – 1 Hour Supply Spiked
The supply zone talked about yesterday was spiked late last night.
As expected we did see a quick move up into the zone (marked with an arrow). Alot of reactive trader would have entered long trades when they saw this candle meaning we have a large set of traders who are going to lose money if the market falls. When the market entered the supply zone we immediately saw a bearish engulfing candle appear on the 1 hour chart.
Looking at the 15 minute chart we can see the bearish engulfing created its own supply zone. You could have used the new supply as a second chance to get into the trade if you missed the initial entry.
Now we are seeing the market move back into the supply zone region. When the market dropped it created a new supply zone which I’ve marked on the first image, if the market returns to this area watch for price action signal to get short, a break of the zone would signal a more significant pullback may be taking place and we should begin looking for entries long.
AUD/USD – Demand Broken, New Swing High
AUD/USD has made a new swing high today, we must now wait and see if the market continues climbing higher or drops down and develops into a consolidation.
The demand zone did give a small move higher but as with EUR/USD this was countered by bearish engulfing candle which set the market back on a move lower. Not long after the demand was broken the market made a large move higher which only just failed to break the high put in on the previous move higher. The market then dropped and almost spiked the lower demand zone. There’s a good chance this drop and the resulting wick marked with an X were caused by a stop run, but we cannot know for sure due to the lack of data the open orders graph shows us for AUD/USD.
Tomorrow our focus is own whether the current advance continues past the highs or fails and the market starts developing into a consolidation.