EUR/USD – Current Low Broken By Large Move Lower
Today we have seen EUR/USD make a large move lower through the swing low that formed back on the 18th November. Although the market has now technically made a lower lo, I still think we are going to see a reversal out of this daily buy zone take place within the next couple of weeks.
The drop has created a supply zone which isn’t suitable for trading due to fact the market is inside the daily buy zone where we expect a reversal to take place. I think when the market starts to reverse, it will move up to this supply zone before falling again, giving the traders in the market the impression the market is going to continue moving lower. The initial rise up into the supply zone might create a demand zone we can use to look for entries long because the banks may not have been able to get all of their buy trades placed when the initial move up began.
For now watch for the market to move up towards the supply zone that formed earlier today, I think the market will drop a little a little deeper into the daily buy zone before it starts to move up so expect a reversal to begin somewhere around the 1.05000 level.
USD/JPY – Sharpe Move Higher Pushes The Market Deeper Into Daily Sell Zone
A sharp move higher which began a few hours ago has ended up pushing USD/JPY deeper into the daily sell zone the market first entered at the end of last week.
The move higher has also created a new demand zone that will probably cause some up-movement to take place when the market returns to it after reversing out of the daily sell zone. I still think we are going to see the market reverse out of this zone, the fact the market has moved up such a large distance without any kind of multi-day pullback or consolidation taking place strikes me as strange and only adds more evidence to the theory that we are going to see the market reverse quite soon.
Tonight watch for a reversal to begin somewhere above the black line marked in the image. The black line marks the point where the market enters the highs where the bank traders got most of their sell trades placed that caused the sell zone to form in the first place, if we are now going to see a reversal occur it will begin somewhere around this area so be on the lookout for any sharp drops you might see from inside the area
AUD/USD – Supply Zone Broken By Move Higher
The supply zone which the market was beginning to fall out of when I published yesterday’s market commentary has been broken today, but the market is now falling again back towards the demand zone which formed at the bottom of the move higher.
Although I did say if the market breaks through the high of the supply zone the demand zone seen at the bottom of the image will become valid for trading, I’m still not really convinced the market is going to turn when it reaches the demand zone. I think instead we’ll see the market break through the low of the zone before reversing and moving back up towards the highs of today’s drop. The reason why is because it will allow the banks to get more buy trades placed to make the market reverse. When the low breaks traders will think it’s signalling the continuation of the down-move and the downtrend, they’ll place sell trades to try to capture a continuation of the move down, the banks will then come into the market and place the rest of their buy trades they were unable to place when the market was falling initially, after that I think we’ll see the market reverse back up towards the supply zone marked in orange.
Tomorrow watch for the market to fall down into the demand zone created by the retracement.