EUR/USD – More Downside
The bullish engulfing candle we saw forming when yesterday’s market commentary was published did not cause the retracement to come to an end. Instead we saw the market drop about 40 pips a couple of hours after it had formed. The drop didn’t last long, and for most of today we have seen the market move back up to the point where the drop originated from. Another small drop has since taken place but this hasn’t caused the market to break below the low of the retracement, which suggests that we may see a move higher develop over the next few hours.
If another move higher does develop I think we’ll see the high of the supply zone broken, but not before the supply zone itself causes some kind of small move lower to take place. This move lower could push the market into a demand zone or buy zone created by the move up to the high. Of course this zone hasn’t actually formed yet, but if it does then I suggest you use it to look for entries long, because at the minute I think there’s a high chance we could see the market start to move up from where it is now over the course of tonight.
USD/JPY – Descending Triangle Pattern Forming
Today we have seen two more swings develop after the downswing which was taking place in yesterday’s post came to an end. The structure of the swings and the fact that the market has caused lows to form at similar prices means the reversal variation of the descending triangle pattern has begun to form in the market. These patterns are supposed to breakout to the downside and the way it’s forming at the moment suggests that we could see this occur quite soon.
You can see from the image how the swing structure over the past few day’s has a caused a pattern similar to that of a triangle to form in the market. Descending triangle patterns tend to breakout once 3 touches have been made on the support line created by the lows forming at similar prices, and when 3 touches on the downwards trend-line have occurred. We’ve already seen 3 touches on the support level take place and two touches on the downtrend line occur so it may not be long untill we see the market breakout and fall towards the buy zone.
As I said in yesterday’s post, with things looking as they are now I don’t think the current swing structure suggests a large reversal is going to take place, so if a breakout to the downside does occur, make sure you watch the buy zone for entries long, because a move back up to the daily supply zone is likely to begin from this point.
AUD/USD – Almost Inside Supply Zone
This afternoon the market has continued its ascent towards the supply zone created by the last swing lower which took place on the 7th March.
I said in yesterday’s post how the retracement caused on the 13th may have formed as a result of the bank traders placing sell trades to make the market reverse, and if it has how we would see the market reverse once it reaches the lower edge of the supply zone. Although the market hasn’t reached the edge of the supply zone just yet, it looks like it will sometime in the next few hours, so be on the lookout for a large bearish engulfing candle to form when the market reaches the edge of the supply zone.