EUR/USD – New Swing High On The Daily Chart
Yesterdays profit taking came to an end early this morning and the market has now climbed higher past the old high seen on the daily chart.
When the profit taking ended the market set off on a run higher which not only broke the high made yesterday, but also the daily swing high which formed back in November. Opportunities to get long were limited, but there was a chance to get into the upmove from the bullish stop run pin found near the bottom of the swing up.
When the market began moving up after the drop, retail traders started to place long trades. The place where these traders would have put their stop is at the 1.13100 level as it’s the nearest round number and it falls inline with the closest low. When the market opens at 08:00 the banks need to get buy positions placed into the market, the only way to achieve this is if other traders are selling so what they do is take a small bit off profit off their trades, enough to consume the current buy orders coming into the market from the retail traders who are buying on the move up.
When the orders are consumed the market drops and breaks just below the round number which is where the retail traders would have had their sell stops placed, when these stops are hit the banks are able to place their buy trades into the market as they now have sell orders available.
The whole up-move today began from this stop run, had the stops not been hit its unlikely the market would’ve moved up straight away and instead may have fallen lower in order to get retail traders to place short trades.
For tomorrow I would keep an eye on the breakout zone marked above, if the little bit of profit taking we are seeing ends up pushing the market lower the breakout zone is a likely place for the market to reverse.
USD/JPY – 1 Hour Consolidation Forming
From the looks of things it seems as though USD/JPY is beginning to form a consolidation.
A small bit of downside movement late last night was not enough for the market to break the low of the move down, we have a situation now where a consolidation is forming due to either profit taking on short positions or bank traders placing trades.
There isn’t really any trades we can take on USD/JPY for the moment, we must wait for the market to break out of the consolidation before deciding to go long or short, for now stay patient and watch for a breakout tomorrow.
AUD/USD – Market Having Trouble Making New Higher Highs
AUD/USD continued its advance higher today, although the momentum seems to be stalling as evidenced by the markets inability to close past yesterdays high.
The move up today has created a new demand zone at the bottom of the swing, should the market return to this demand an opportunity to go long could present itself. The fact the market has failed to close beyond the high made yesterday suggests to me the up-move could be stalling and the market could fall lower back to the lows of the current swing or swing low found just below it.
Keep and eye out for price action entries long if the market falls into the demand zone tomorrow.