There was some buying on the recent dip shown by the three dots (Oanda), and after the dynamic trend turned up for the 2nd time, there were 2 low volume bars showing temporary lack of supply. The first target is the blue dot at 137.3, while looking out for weak supply/no-demand signals that could turn the prices to the zone of previous buying at 133.3.
AUDUSD has shown several weak signals approaching the down trendline, which was a confirmation that the downtrend was to continue. After some strength on the end of the US Session at 15/July (blue dot), the market reversed and it rallied to the trendline once again. Upon reaching near it, the market tested for demand in the market, by marking up the prices and waiting for activity to show up. The volume was relatively low, below the average, and the prices failed to rally, which means the No-Demand test marked by the pink bar, failed, and there was lack of demand in the market.
Shortly after there was an alert on a trendline nearby, and the price hit the first target already, which guarantees we’re not losing anything in this trade. Before the downtrend continued, there was a 2nd similar alert. For a future short entry prices must come up near the trendline again, to guarantee a good Risk:Reward. Also look out for strong signals in this price area, because of the 15/July strength, which could turn the trend.
After the Greek voted ‘No’ on accepting the Troika’s bailout proposal, Euro gapped down at the opening, in seeming weakness. But lower prices meant it’s now a currency more attractive for buying, which is what institutional traders did – we can see 2 major demand bars, still in the Asian session, and afterwards test bars (Oanda’s feed). EURUSD also failed to break the previous support at 1.095. I’d like to see either a trendline break or the prices testing the demand zone, to get in long at a better price and to ensure the trend is really about to change. The daily trend is still clearly down, and this move is happening after major supply at 1.134 in the beginning of June, which could dominate over these smaller trends if there’s not enough strength for a pullback to happen.
The referendum on whether the Greece government should accept Troika’s bailout presented at 25th June, will be held this Sunday. The polls show that the ‘Yes’ and ‘No’ are tied, and so speculation about the result will last until the very end. This undecision is of course being reflected on the markets.
In the Euro pairs, we can see there was significant supply at 2nd July (today was US Independence day, which means most of the positioning for the referendum was actually made on Thursday), marked by the red dot and very high (red) volume. Similar signs can be seen in other Euro pairs, such as EUR/CHF and EUR/GBP. This was to be expected, as investors are disposing of their Euros to reduce their exposure to the expected volatility.
In stocks, there was buying in the last few days, and no selling pressure when prices were coming down. These are most probably traders closing/reducing their short positions from the beginning of the correction (CAC40).
In normal conditions, institutional traders more or less know how to value on what they’re investing in, otherwise they’d be bankrupt given time, and their trading based on that analysis can then be seen on the volumes and prices action. But in this case, since nobody has a way of knowing the results of the referendum beforehand, the safe approach for an investor to take is to reduce or close completely any open position on Euro pairs or stocks. I believe that the results on the markets of the Greek’s people choice is skewed to the downside though, since if ‘No’ wins it means the negotiations will continue and Greece is closer to exiting the Euro, and it’s extremely bearish for the Euro and stocks. If ‘Yes’ wins, Greece will go through the path it’s been on for the last years, and so it carries a more predictable effect on the markets.
As prices rose above the long-term trendline (drawn in the daily), supply signals quickly made the prices reverse and come below it again, continuing the downtrend. After the recent gap, there was some buying, seen by the green signal, but as prices reached the trendline, they again reversed on a supply signal. Currently prices are near the previous demand area, which is the key area to be hold or broken; a rally to the trendline and more weakness would mean further down movement, and in that case this demand area would become somewhat meaningless, as the supply in higher prices more than compensated for the demand that there was at this area.
In Euro/US Dollar we’ve seen massive buying recently, which subsequently made the downtrend reverse. This can be seen by the very high volumes and green signals, highlighted in the drawn box. Tecnically, the prices are just below a down trendline, and an interesting bar was seen in the weekly timeframe, signaled by the arrow and an orange histogram – this was an upthrust, a bar that closed on the lows of the week, yet making a high significantly far away from it. The high is at 1.138 and the close at 1.110, and it’s accompanied by a very high volume. If the prices traveled such a distance on such a volume, this means that was actually selling coming into the market that week. The question is whether this is just a temporary weakness, and we can look at the daily for more clues…
In the daily timeframe, there were many strong signals since March’s bottom, and prices are making higher lows ever since, which means until now the market has been sustained, but reaching at the trendline, the volumes are quite low. Two possible scenarios are: the trendline being broken with moderate/high volumes, which would be a good demand confirmation for a long OR the market makes a lower high or lower low, which would break the uptrend going on in the daily and would mean the weakness seen in the weekly timeframe is ‘spilling over’ and preventing further advances.
