On the last post about AUDUSD, I wrote that prices were on a trading range between two major supply and demand zones. I noted that an up reversal on H1 had just appeared, and it would be a good idea to enter if the bar’s high was broken. On the Asian session (9pm UTC) it was broken, and a long was taken here. Prices went on to correct yet again, but more demand showed up, and later another up reversal. This was the entry opportunity #2.
AUDUSD – Volumes and Reversals Trading
When prices rose up to the supply zone, this was the first warning to start being careful. I exit when there was a supply signal in this same zone. A few bars later, a down reversal appeared, and the market went crashing down.
M15
In M15, given the recent weakness, the background is just showing just that. It would be interesting to see a break of the 0.713 support for weakness confirmation, support which was formed by a shake-out. To the upside, with a strong background, strong VSA signals or up Reversals could be traded above the support.
After the high volumes that was noted on the last post (zone 1), I wrote that if prices failed to continue the rally soon, this would be a sign of too much supply hitting the market and would be a probable reversal point. In the Asian session the prices failed to rise, and a bit more supply showed up as a churn bar (green bar) after a small rally. When the London session opened, the prices went down to re-test the previous area of demand.
In (2), we can see that the volumes picked up again, and VSA showed a demand signal. The volumes were also higher than the last top, which was a good indication of renewed interest in the up move. As the background was still strong at the time, Alert System indicator sent out an alert to go long on the high of this demand bar.
Prices continued to rally afterwards, and upon reaching a medium-term resistance at 1.138, Supply signals from the current timeframe and from D1 halted the move.
In (3), we can see a successful test (the test is the dark blue bar, 3 bars ago) near the prices of the previous demand, as the prices broke its high. The background is weak though, and so taking a long right now, while possible, is risky and would have to be with a tight stop-loss. Other EUR pairs such as EURJPY are looking better, since it’s just now emerging from a double bottom with demand as the current prices.
EURUSD H1 Demand Signal + Background
In my previous EURJPY analysis I pointed out that the prices were just testing a down trendline, and given the accumulation seen behind, it’d be wise to wait for an up-breakout of the resistance. Subsequently, this trade was taken based on these developments:
- The background was strong at the time of breakout, which maximizes our chances.
- There was accumulation behind, shown by multiple demand signals without the price going to new lows. Note: there is a difference between the older post chart and this one, as the previous was from GMT-5 feed, while this is from a GMT+2 feed, both in Oanda. Nonetheless, the market picture is fundamentally the same.
- The break-out showed increased volume not exactly on the break-out bar, but in the next one. This is usually fine, but I prefer to wait for confirmation when this happens. The confirmation was given a few hours later, after the low volume down bar was broken to the upside, showing clear lack of supply in the market.
- The first warning sign to exit was the extreme volume up bar, with no follow-up. Later a Supply signal from the Daily showed up, which confirmed the weakness. Closed when the trend turned yello. The take-profit from an alert would give an exit around these prices as well. However, if you have the time to manage your trade, and can react to changing supply/demand in the market quickly, trading without take-profit with this system also works.
Right now I’m holding a short position in the daily, as this weakness is just below a long-term down trendline. The correction is seeing relatively low volumes, but that could be normal after the distribution seen on the red bar. Either way, the trend is still down, and so, I’m just watching where the market takes me for now.
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.
As the Sterling is selling-off for weeks in a row, it makes sense to look for intraday opportunities in GBP pairs. Likewise, gold is also getting stronger, as the Dollar weakens, and AUD is directly affected by these movements, as Australia is a major gold exporter.
Since 6th January, GBPAUD H1 has been forming a round top, which is a typical distribution pattern. Most importantly, VSA confirms it, as the there have been major supply signals in H1 and above timeframes, and sluggish movement. The background has also been weak, and an opportunity arose when there was a minor supply signal in H1, to which there was an alert given.
GBPAUD H1
- Weak background
- Supply signal
- Entry on the break of the supply bar (could also be on the previous)
- Exit on take-profit. If not having exit, with the low volume bars, it would be wise to atleast close the order partially and get in at a better price.
The prices are now approaching a previous support at 2.017, and are on the lower part of the trading channel. There could be opportunities to counter-trend trade, if prices can stabilize above the recent low at 2.02457 and demand comes in.
GBPAUD H1 Trend Channel
