Although this market has taken a tumble just recently, the weekly and daily timeframes still show price trading within overall demand (1142.5-1167.3/1142.5-1154.5) at the moment. Therefore, we cannot rule out the possibility of a rally higher just yet.
Taking into consideration the points made above, we believe there to be two possible ways to trade this pair long today:
1. Wait for price to clear offers sitting around the 4hr swap level coming in at 1149.6, and look to enter (with lower timeframe confirmation) on any respectable retracement seen at this level.
2. Assuming price cannot manage to get above the aforementioned 4hr swap level, the market will likely swing south and attack yesterday’s low 1143.2. This could be a perfect level for well-funded traders to break lower for liquidity. Think how many day traders will be looking to fade yesterday’s low. Millions would be our guess! Therefore, should the market break this zone and stop these traders out, liquidity will be available (sell stops to buy into) to bounce prices off of the 4hr sitting just below it at 1142.2. Furthermore, there will also likely be a lot of breakout traders also trying to catch a ride if yesterday’s low does break, and if our analysis is correct, all they will have done is shorted into higher timeframe demand and 4hr support. Therefore, once these breakout guys are stopped out (buy stops) this will add to the upside momentum seen from the 4hr . Buying from the 4hr support barrier using a pending buy order, however, is risky in our opinion, we’d much rather wait to see how the lower timeframe price action reacts here. If there is a rebound and strength is seen, we would then enter long at market.
Levels to watch/ live orders:
• Buys: 1142.2 (Stop loss: dependent on where one confirms this level).
• Sells: Flat (Stop loss: N/A).