Daily Timeframe: The picture reveals that the upward momentum seen from the daily demand area at 115.55-116.38 may be diminishing, as price begins to stall just below a daily supply area seen at 119.95-119.14.
4hr Timeframe: Recent movements on the 4hr timeframe show that price did indeed see a reaction around the 118.00 region consequently sending prices back down towards the 4hr demand area at 116.91-117.22. We were unfortunately unable to catch this move on the lower timeframes – well done to anyone that did! The market clearly likes this aforementioned 4hr demand area as price was seen rebounding strongly from here, taking out the118.00 handle and pushing into a weak-looking 4hr supply area coming in at 118.84-118.52.
With the showing price hovering above major support, and the indicating that there is room to move north, we are naturally expecting the current 4hr supply area to be consumed and 119.00 to be tested. 119.00 could be a nice area to look for a ‘bounce trade’ as we would then be trading just below the aforementioned daily supply area. In addition to this, notice that just above 119.00 we have a nice-looking fresh 4hr ‘sell zone’ at 119.31-119.12. Pro money will likely see this as an opportunity to fake above 119.00 into this supply area, one can only imagine the amount of buy stops lurking just above this number. Dependent on your style of trading (and if price reaches 119.00 of course), we intend to wait for lower-timeframe selling confirmation around the 119.05 mark, as we mustn't forget where we are located on the weekly chart! (See above).
Current buy/sell levels:
• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).
• Sell orders: 119.05 (Predicative stop-loss orders seen at: 119.38).
As always, a nice explanation of your thoughts!
Do you use correlations when forming trading ideas? If so, what is your opinion on the following:
The DAX 30 and USD/JPY state clear correlation, but what is your opinion on this from a fundamental standpoint?
Also, what's your opinion on the EUR/USD - DAX correlation at the moment, which correlated relatively well until mid last year?
We all know the risk-on/risk-off mantra, but it seems that more and more vehicles get sucked into this massive black hole.
Correlations work, and then they don't. You know this, and I know this. At the moment, EUR/USD - DAX correlation makes a lot of sense from the standpoint of what has happened to US equities in a similar circumstance.
Is it similar, is the question. We can only make (tenuous) assumptions, manage risk, and take our losses while preserving our capital.
The winners take care of themselves -- as long as we manage risk.
Am I wrong?