Australian Dollar went through a 90 pips fall in prices on the US session today, partly because of RBA recently communicating the reasons behind maintaining a low cash rate, with no prospects of raising it soon, and also because of the recent movements in gold, which influences Australia’s major gold exporter economy. Looking at prices and volumes, we can see the same picture – a top in very high volume and several Supply signals, without the volumes slowing down on the way down, and with a weak background.
There are 2 important zones to note in this chart – first, the distribution top, and second, a recent low which showed demand on really high volume. These were the last major professional sell and buy points, respectively, and so they should be the trigger zones to trade, either on a bounce or a break-out – the market will tell. If I see more demand signals near this area I expect the prices to rise yet again, as the professional money is clearly showing it’s buying this bottom, and not letting prices go below their last major buy point.
Control Zones AUDUSD M15
On H1, what jumps immediately to the eye is the major shake-out, which VSA marked as Major Demand; that major demand is what’s dominating this market. Looking at Reversals, we can see that on the highest sensitivity they have been showing all the tops and bottoms, and just 1 hour ago an up reversal was seen. The break of this bar’s top in the next hours would be a good buy point, and looking at M15, that would also be the break of the recent low volume up bars. The areas on M15 should be then watched, and special attention given to other reversals or VSA signals for exits.
EURUSD has been in a strong uptrend after breaking out from a base last week. The prices also broke an important down trendline in a furious up movement, on high volume and wide range up bars. It’s now in a critical area that will be characterized by a high volatility.
In areas of previous resistances, this volatility and volume spikes are normal, and can be somewhat tricky to understand, but using VSA and Reversals this job is simplified as they’ll show the most important bars. We should first look at the background: it was strong during these movements, and so we should look for up reversals. In the hourly chart, the first one (zone 1) appeared at the same time as major supply, which is something to avoid. The other two (zone 2) were in an area of previous demand, and were soon confirmed by another strong VSA signal. Down reversals on the other hand, signaled less significant movements that lasted for a shorter amount of time.
EURUSD H1 – VSA, Volumes and Reversals
On to the current action (zone 3), Reversals showed a down Reversal, which marked almost the absolute high of this correction. Apart from that, after these such high volumes, I’d expect prices to continue further with small or no retracement. If they don’t keep advancing, it means much of that volume was supply hitting the market. The market has to show it’s not being conditioned by the supply anymore, with low volume bars or a successful bullish test, above the previous resistance.
Euro/Yen has been ranging since the beginning of January, when looked at from a 4-Hours perspective. Volume-wise though, it has been very active, and understanding this activity is essential to know what the major players are doing.
- First there were several demand signals just as 2016 was starting. This halted the down move. Afterwards there stopping volume when reaching 129.0 area (red bars).
- More recently, there was a major shake-out, painted as Major Demand by VSA – there was a lower low made, yet prices closed on the highs of the bar, and above the previous support. This was a move to hit stop-losses which provided plenty of liquidity for professional buying.
- Approaching the down trendline, there was a no-demand test (pink bar) – as prices penetrated the trendline, the volumes didn’t keep up, which means there wasn’t much demand. On the next bar, prices refused to close down though, on a relatively high volume. This could mean renewed interest in an up move, and the confirmation will be the trendline break on good volume (checking the hourly might be the best). If the bearish test succeeds, as in a failure to seeing a breakout of the trendline and/or test’s high in the next bars, I’d expect prices to drift downwards onto the support. The ultimate level to watch for is the resistance at 129.074.
NZDUSD H1 Trade analysis:
- At the time of entry background was strong – background didn’t have time to turn weak and it is wrong to go short in this case
- Weak signal (Minor Supply) before trend changed (moreover this signal appeared near mid-term resistance) – this is a correct setup for a short trade.
- Entry after dynamic trend turned red – it is o’k (the best way to open trade in a low volume up-bar while the price is not far from market turn). It is better to place stop-loss above resistance (in our case it is below – not o’k).
- Trade has to be immediately closed after two Minor Demand or Demand, Major Demand signals, because there is a big chance that prices will turn direction after this signal. Reversal signal also confirms market turn in this place.
This is a near resistance trade which was opened after up-thrust in USDJPY.
In this chart we have long-term resistance which was created by previous high. At first market was rising, than we had an up-thrust (2 wide spread bars with high volume).
Up-thrusts can be recognized as a wide spread up-bar, accompanied by high volume, to then close in the middle or on the low. Up-thrusts are usually seen after a rise in the market, where the market has now become overbought and there is weakness in the background.
High of the first bar has almost reached the resistance level but closed in the middle. Further weakness showed in the second bar which closed on the low. VSA indicator detected 2 very weak signals here (Major Supply). Reversal indicator also suggested that market can turn in this place.
- In H1 timeframe background was neutral. In this case you should check above timeframe. H4 was weak, so it is o’k for a short trade.
- Several very weak signals (Major Supply). Reversal indicator also confirms market reversal in this place.
- Entry was made when dynamic trend was red.
- Exit after 2 Minor Demand signals (Reversal signal also confirms the exit)
Total: + 110 Pips
USDCAD M15 Trade analysis:
In this chart you can see a very popular entrance among traders – buy stop at the level of previous high. I will analyze this trade from the view of Analytical Trader.
- At the time of entry background was strong – it is a correct part for a long setup.
- There were several weak signals (two Minor Supply) before trend changed and no strong signals. It shows that selling has entered the market. It is very risky to go long in this case.
- Reversal signal also confirms that market can turn down in this place.
- Dynamic trend turned from green to red – it is wrong for a long setup.
- Trade has to be immediately closed after two Supply or Supply, Major Supply signals, because there is a big chance that prices will turn direction after this signal.
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