EURUSD Daily
After the negative numbers on NFP last Friday, EURUSD fired up on massive volume, and is now getting to the point of previous distribution. A lower timeframe will show the recent picture more clearly.
EURUSD H4
On H4 we see that there is some supply at this price level, but with the massive buying on NFP that took place, I expect major players to be still supporting an up move, until they can sell more of their positions – there is still room on the upside to go.
The Pound went through a sell-off in the last days, after testing a resistance at 1.471. The volumes showed supply through May when attempting to rally to the 1.4700 area, but the prices held on below it, with only minor shake-out attempts. Even though there was an up trendline, which shows the long-term trend, a trend can always change, and that’s usually the case when there is professional selling over an extended period of time.
The trade was taken on early London session on the reaction rally, where more sluggish action was seen, and the take-profit set above the nearby trendline.
Resistance Fake Breakthrough
AUDUSD H1 Volume Trading
Following the inverse head-and-shoulders with buying volumes on the bottoms (point 1), seen in M15 and mentioned in the previous post, AUDUSD reached more attractive prices for buying and resumed its rally. Upon reaching a resistance level (down trendline) at point 2, volumes showed supply swamped demand, and the market reversed. Reversals also confirmed the second one, at the highest rating sensitivity. It’s an indicator that can be used for confirming VSA signals, or to show additional likely reversal points, like the one on the bottom at point 1.
Prices then followed the down trendline, and reversed at point 3, where VSA marked a Demand signal and a thrust bar. After 2 more supply signals showing up, at point 4 the trend was again stopped. This is often the case that the market oscillates between VSA signals, and shows the importance of correctly following the volume in trading, even if relative volume as in Forex.
After the supply shown at 4, the reaction was a frail rally with low volumes, which showed no interest by large players in an up move. In the last hours, another thrust bar appeared (pink bar), which is a common occurrence where uninformed traders go long, and that liquidity is used to dump sell positions and thus bringing the market lower very rapidly during the same hour.
Looking at the big picture, AUDUSD H1 is the middle of a trading range and on a small sell-off, so it’s risky to take any position in the hourly just yet. Prices should reach Gold, a commodity that is tightly related to the Australian Dollar, has just reached a very important support located at $1209. There was a no-supply test bar at H4 which seems to have been unsuccessful, as there was no upward reaction, and so lower prices are to be expected, perhaps a shake-out of the area.
AUDUSD on the 15 minutes timeframe, is showing significant buying at nearby prices, with an inverse head-and-shoulders price pattern. This price pattern is characterized by 3 bottoms, and unlike many other unreliable price patterns, this one has actually a sound logic behind it: the first bottom is met with buying, and so the down move is halted. On the 2nd bottom, the lowest of the three, the market is shaken-out by being taken to new low ground, setting off stop-losses and triggering shorts on break-out traders. The market then reverses on professional buying using the ‘discounted’ prices, and then it still goes down one more time for some more buying, or just for supply testing. Though, using the prices alone isn’t enough, the volumes give useful information which should also be incorporated. In this case, VSA showed demand on the 3 bottoms, until the very last bar where the pattern’s high was broken.
On the last high, AUDUSD showed a no-demand test (testing higher prices for demand orders), which was met by a sudden down move, confirming the lack of demand. For an up move to continue, I expect prices to come closer to the lower part of the trending channel first.
In the first hours of today’s London session, activity and volumes spiked up in gold. This activity, VSA showed, was major supply hitting the market, just below a high formed days before, on heavy supply, at $1258. In the last post we noted that below $1270, the “control point” of selling of the last weeks, we should be looking for shorts in lower timeframes, and this was the ‘golden’ opportunity.
In M15 there were multiple supply signals, and the background turned from strong to neutral.
Supply in uptrend in Gold M15
In M5 the dynamic trend turned red shortly after, when the short was taken, with SL above the previous high and TP a bit above the down trendline, where buying is to be expected. Prices went down on wide range and reached the target, with the rally afterwards showing low volume. When prices attempted to break the trendline, VSA showed Minor Demand, and the price then went up on high volume. The no-demand test shown in M5 (pink bar) succeeded, as there was supply afterwards and its low was broken, which is a temporary stop of the uptrend. The background is strong in M5, and more demand, or a bullish test, just above the broken down trendline, would be a long.
Supply and trend turned down in Gold M5
Like I wrote in last Monday’s post, it was likely for the uptrend to continue due to the major shakeout, in the first blue rectangle. After the rally on the Asian session, yesterday by the end of NY session, we have seen one good VSA setup which will often mark as Top Reversal, near a zone of previous supply.
The reason why we commonly should consider this as sign of weakness are:
1. Volumes were decreased on two up bars when this candle tried to break 1.1050 level.
2. On the second try, which is marked in the 2nd blue rectangle, confirmed this as Top Reversal. Combination of two bars give us insight that supply has swamped the demand. First bar is marked up with very high volume and closing on the highs. And the next bar rapidly reverses down on a wide spread and closing on the lows.
The market went down quickly after, which gave no opportunity for a confirmation, in the form of an upthrust or no-demand bars. But as there was an up trendline nearby, its break would be another confirmation (Trendline breakout), of course, if you happened to be watching the markets in the mid of Tokyo’s session! EURUSD kept on downtrending and only more weakness after a significant rally would give another opportunity for a short. Below the support at 1.09394 I expect more demand to show up, as the trades who bought at the shake-out earlier might still be interesting in buying more at those prices.
Distribution, Trend Changing in Eurusd
