The charts levels and zones will be color coded for the benefit of readers as follows:
Weekly TF = Black. Daily TF = Gold. 4hr TF = Brown
U.S dollar index: for correlation purposes.
What a beautiful sight that is! Compare the price action over the last 3 weeks to the weekly candle just closed, a complete engulf was seen with the market closing at 1.37605. Could we see a move down to demand area 1 at 1.34770 – 1.36837? This is very possible, although do be aware after a big engulfing candle appears such as this, a retracement is normally seen, so we may see price move back to the base of supply at 1.42470 – 1.38580, as per this timeframe.
Could last week’s bearish price action be the start of a downtrend? This is a question that may well be answered in the coming weeks.
A quick note of the demand zones below:
- Demand area 2 at 1.32953 – 1.34954 is not a fresh zone, meaning some of the buyers have already been consumed, however this area still may contain active buyers.
- Demand are 3 at 1.31047 – 1.32272 is a fresh zone. Out of all 3 zones, this will more than likely provide the biggest reaction if/when price reaches here.
Friday’s price action well and truly sealed the deal that sellers have taken control for the time being. The low of 1.37734 marked with a circle was completely consumed and stopped out most traders trying to go long around the Daily S/R flip level at 1.37931. This is not a good sign for buyers here as this was a strong level that created the higher high at 1.39909.
A fakeout was seen at supply (1.39669 – 1.39342) clearing sellers out and taking (buy) stops from traders trying to sell, and buy orders from traders attempting to buy the breakout. This obviously gave pro money enough liquidity (buy orders) to sell into without even having to manipulate the big figure 1.40000.
Even with the fakeout above, price still remains capped between supply at 1.39669 – 1.39342 and demand at 1.36727 – 1.37313, and we have yet to see a full break.
The USDX provides a great way to add confluence to a trade. The Euro faked an area of daily supply, just missing weekly supply by a few pips (levels above), and the USDX faked a weekly support level at 79.12 to rally prices higher. There was a subtle difference though on Friday’s daily close, the Euro showed a break of an S/R flip level (level above) whilst no break was seen on the USDX (S/R flip level – 79.96), more of a slight reaction. This may mean the Euro is due for a retracement, or it may mean the USD is due to appreciate and break the S/R flip area just mentioned, this week will definitely provide the answer, but be aware of this close inverse correlation.
The origin/demand area at 1.38122 – 1.38286 marked number 1 got consumed relatively easy on Friday; however not before a little hesitation zone was formed marked with an arrow. The demand area that was consumed will now act as supply for possible future trading opportunities, much the same for the demand marked with an x at 1.38722 – 1.38795.
Supply number (2) and demand number (3) (1.37941 – 1.37712 ….1.37374 – 1.37487) are interesting. The market showed us buyers came in on the last 4hr candle at demand area 3. Pin-bar traders be aware! Although this may look like a fantastic pin bar, all this could really mean is pro money taking partial profits from the leg down, furthermore, if you were to go long on the break of this pin bar where would the next target area likely be? It would be supply area number 2! Not the best risk-to-reward, would you not agree?
If a break of demand area 3 is seen next week, look for more buying pressure to enter the market, as price would’ve entered daily demand (levels above), which in turn is just above weekly demand area 1 (as shown above). So, with all things considered the Euro should be quite interesting this week.
- Areas to watch for buy orders: 1.36727 – 1.37313.
- Areas to watch for sell orders: 1.37941 – 1.37712, 1.38122 – 1.38286.
- Most likely scenario: Price will likely be contained within demand area number 3 and supply area number 2, during the low-volume sessions. When Europe/London opens, price may break to the downside, however before doing that price may spike supply which was previous demand at number 1 for liquidity to move price deeper into daily demand (all levels area above).
This timeframe shows that buyers attempted to touch base with upper supply at 1.76290 – 1.70490, but failed in their conquest. The weekly candle just closed shows sellers were in control of the market for most of the previous week’s trading as price closed within the body of the previous weekly candle. Take a look at the past 4 weekly candles, every weekly candle closed above the previous candle’s close; this is very significant as last week we did not see this happen.
Areas noted on the charts for reference:
- Weekly consolidation zone: 1.67980 – 1.42273.
- S/R flip area within the consolidation zone: 1.62710.
Since the last weekly analysis, price has rallied hard into daily supply at 1.70410 – 1.68880 and consumed lots of sellers in the process. The most obvious place for near-term demand with likely buyers waiting on this timeframe is the S/R flip area at 1.66630. If price were to get down to this demand area, a break of the daily trendline would be in order, so it will be interesting to see what develops if that is the case.
The drop from 4hr supply (1.70410 – 1.69840) was absolutely beautiful, and so it should be considering price was within daily supply (levels above) and just 30 to 40 pips away from weekly supply (levels above).
Sellers were too strong for the buyers at demand marked with an x (1.68536 – 1.68725) as it had higher timeframe power with the down move, all buyers were consumed in the process, price has yet to reach demand just below it at 1.68072 – 1.68260. This may be a nice area for a bounce as this is the demand area pro money used during and a little after the NFP announcement this month.
Price is currently caught in a small area between supply which was previous demand at 1.68536 – 1.68725 and demand at 1.68072 – 1.68260.
With all that being said, do be very careful about taking any long trades on this timeframe, even though the current daily trend is up as we are very near weekly supply which is not to be taken lightly.
- Areas to watch for buy orders: 1.68072 – 1.68260, 1.66630
- Areas to watch for sell orders: 1.70410 – 1.69840, 1.68536 – 1.68725 (previous demand, now supply)
- Most likely scenario: Price will likely meander between near-term supply and demand (levels above) testing both areas during the low-volume sessions. When Europe/London opens we may see a break north as swing traders lock in gains from the recent down leg, price has now consumed demand marked with an x (levels above) so price is free to hit the next fresh demand, but before this happens price may retrace back to the origin of the down leg which is the 4hr supply (1.70410 – 1.69840) to collect more liquidity for a bigger move down.
As reported in the last weekly analysis, higher prices may be seen, judging by the mild reaction off of the weekly S/R flip level (0.93718), and this did happen last week. Price is now currently trading around this important area, with the market closing at 0.93585.
If price decides to go north, the risk to reward for long-term traders is not good enough due to supply at 0.97576 – 0.95718. A drop in price is more likely as there’s bigger room for profit with a logical demand area below at 0.86601 – 0.88258, nonetheless, price is still capped by the zones just mentioned.
Let’s go down a timeframe to if there are any more clues as to which direction price may take this week.
Price action saw a lot more movement last week compared to the week before.
It took a while but price eventually reacted off of demand at 0.92054 – 0.92649 and made its way to supply at 0.94468 – 0.93758. This supply however is weak due to a spike through the zone made back on the 10/04/14 consuming most of the sellers. So at the time of writing price is still capped between these two areas (levels above).
If a break is seen above, we may see price rally further this week to fresh supply at 0.95434 – 0.94862 as per this timeframe before any drop is seen.
Considering the weekly chart shows price at a strong resistance (S/R flip area), and fresh daily supply is seen just above (levels above), it makes sense for price to rally a little bit to collect more liquidity before any move down is seen. This will stop out a lot of traders trying to short the weekly area giving pro money their stops (buy orders) to sell into, not forgetting breakout traders’ buy orders there also!
Just to recap, we are currently within weak daily supply (levels above). Price on this timeframe is capped between minor demand at 0.93186 – 0.93345 and supply at 0.94253 – 0.94040.
A break below could see price testing demand at 0.92570 – 0.92745 which would effectively bring price back to the lower limits of the daily timeframe consolidation (levels above)
A break above, which is what is likely to happen could trigger further bullish buying activity towards fresh daily supply (levels above) as discussed when analyzing the daily timeframe .
- Areas to watch for buy orders: 0.93186 – 0.93345, 0.92570 – 0.92745
- Areas to watch for sell orders: 0.94253 – 0.94040, 0.95434 – 0.94862
- Most likely scenario: Price will likely trade between supply and demand highlighted for the lower-volume sessions, once volatility picks up price may break upper supply at 0.94253 – 0.94040. Before this happens though a break of demand (0.93186 – 0.93345) may be seen to collect liquidity for the push up. Traders should be cautious trading where price is currently capped as a break is expected soon.
Last week’s price action saw a drop in value making an overall weekly low of 101.431, 10 or so pips away from the actual S/R flip level at 101.328 with trendline confluence.
A reaction was seen around this area, but it is very difficult to see the full value of this reaction due to price trading in and around this level for 14 weeks now with no real movement suggesting bullish activity, other than providing long-term support for the market presently.
Long-term areas to note:
- Supply at 110.650 – 108.360.
- Demand at 96.564 – 98.231.
Similar to the last weekly analysis conducted, price has not moved much this week at all.
Price still remains capped between supply at 104.842 – 104.174 and demand at 101.207 – 101.754.
The demand area just mentioned has had three touches already, each time, demand/buyers are weakened, so be very cautious going long around this level for the time being.
If we do see a break of this demand area, this will prove significant as price will not only be breaking daily demand, it will also be breaking a weekly S/R flip level (levels above) and a weekly trendline. The next area of demand below is at 99.571 – 100.132 which also holds the big figure 100.000, so do note this level down for future buying opportunities if a break is seen.
With the daily timeframe analysis reporting to be cautious of going long around the current daily demand area, the 4hr timeframe price action seems to agree (at the time of writing).
Demand at 101.536 has proved itself, however the reactions seen do not display serious buying interest. Look at the two arrows on the chart below, these tails may show pro money consuming small demand areas for a possible move down.
With all things being considered, price is still capped between supply which was prior demand at 102.017 – 101.865 and demand at 101.536. A break above (fakeout) supply to the S/R flip level at 102.128 is still not out of the question, as this could facilitate liquidity requirements for a bigger move down i.e. buy orders for pro money sell orders. Nonetheless, even though long trades are currently not advised here, we still have strong support with the weekly S/R flip level (levels above) within daily demand which is the last area within daily demand where strong buyers may be waiting, so be careful out there traders!
Areas to note:
- Supply area 1: 104.129 – 103.816
- Supply area 2: 103.055 – 102.742
- Areas to watch for buy orders: 101.536, 101.328 (Weekly S/R flip level).
- Areas to watch for sell orders: 102.017 – 101.865, 102.128
- Most likely scenario: Price will likely react a little off of supply at 102.017 – 101.865 before making a push up to the S/R flip level at 102.128, to load up for the big push down. The weekly S/R flip level at 101.328 is expected to provide support within daily demand.