So I have another question regarding supply and demand that I still need to get my head around.
As we can see from this image of EURUSD on the daily, price has hit a monthly demand zone and then broken above 2 daily supply zones.
I want to remove the higher time-frames for now and focus just on the daily.
As you can see from the image, the institutions were placing sell orders and moved price down to the low of the chart.
As we can see, price broke through 2 supply zones that the institutions used to place sell trades. This therefore means that the institutions have closed the sell trades they placed at the 2 supply zones and have potentially placed buy orders at the lows.
My question is if we have had both of these supply zones broken, (because the institutions will not let price push far past an area they have trades placed at to avoid jeopardizing their trades) does this make both the higher supply zones less likely to work out?
I know that the weekly and monthly supply and demand are also in play, but from an entirely daily perspective if they have taken out 2 areas of supply meaning they no longer have sell trades placed at those zones they took out, wouldn’t this also mean they are likely to have closed their trades at the 2 supply zones above.
And since the up move was caused by monthly demand, if we now see a move to the downside out of the supply zones price is now nested within, could we assume this is more likely to be profit taking to accumulate more buy orders?
I hope you understand what I mean,
My Answer:
Okay, let’s get right to your question!
Those three lower highs breaking doesn’t confirm “banks closed their trades” but it’s definitely a clue. The highs weren’t formed by massive sell orders from the banks, so price breaking above isn’t a huge deal.
Why?
It’s all about what happened before those highs.
They formed after a big drop, when most traders were already selling.
That means there weren’t many buy orders left for the banks to unload their sells onto. Compare that to the two highs at the top of the decline – those happened after a long price climb, with everyone feeling bullish.
That’s when the market was flooded with buy orders, perfect for the banks to sell into.
Get the picture?
Now, about the current price action…
I’m with you on the possibility of this downturn being a bank accumulation phase before another major upswing. This rally has been impressive, but it can’t last forever without a decent pullback. I’m expecting a multi-day decline sometime soon, maybe even this week.
Of course, I can’t say for sure exactly when or where it’ll start, but I’m keeping a close eye on the market for those telltale signs.
Hopefully, this sheds some light on things!