EUR/USD – Stop Hunt Below Yesterday’s Lows
Today we have seen the consolidation which started at the beginning of the week continue, although a stop run below yesterday’s lows possibly suggests we could see a move higher cause a retracement to take place sometime tomorrow.
If you check Oanda’s open orders graph you’ll see that the sell stops had been placed roughly at the 1.06300 level, which was right below the point where yesterday’s low formed. It’s likely these stops we’re placed by traders who went long last night trying to make money off the up-move that took place in the evening. The fact the stops were hit and no stop cascade took place, suggests the bank traders either want the consolidation to continue, or they want a retracement to occur. If they wanted the market to reverse, they would have let it hit the sell stops and then took no action, as that would’ve caused a cascade to take place and push the price down.
I’m not sure whether we’re going to see a retracement occur or the consolidation continue, but in either case I’d continue to watch the supply zone found above the current market price.
USD/JPY – Big Drop Back Into Supply Zone
Yesterday we saw a sharp move higher take place and push the market back up towards the supply zone which had been created as a result of the drop. It seemed like this up-move was going to continue, but yesterday evening a large drop took place and caused the market to fall back into the demand zone created by the sharp move higher. Today we have seen the market move back out of the zone, but so far it hasn’t been able to move back up to the point where the drop took place.
If the market ends up falling from where it is now sometime tonight or tomorrow, I think the demand zone will end up being broken, maybe not right away, but possibly after another small move higher has taken place. If this up-move continues, and the market is able to break above the high of the drop which caused the fall back into the demand zone to occur last night, a move into the supply zone is probably going to take place, so make sure you keep an eye on the zone for potential entries short.
AUD/USD – New Lower Low
The retracement we were seeing take place yesterday ended up coming to an end before the supply zone was reached. The subsequent drop caused by the termination of the retracement has caused the market to fall again and break through Tuesday’s low. The market is now really close to entering the daily demand zone found between the 0.7525 – 0.7488 levels.
The fact that we have started to see some retracements take place upon the market entering the daily demand zone suggests the bank traders are beginning to take some profits off their trades ready for when a reversal or large retracement out of zone takes place. It’s not possible to figure out which one it’s likely to be until the market has dropped into the zone, so for the moment I think it’s best to just monitor the price action to see what has happened by tomorrow.