Why Did This USD/CAD 1 Hour Supply Zone Fail?

HI, i got one question very confused when i am in trading. 

As you can see the 1H chart of usdcad, after the signifcant drop, price has made mutilpile swing highs almost at similar level (marked with x), which means possible bank placing sell trades, and price drops makes a lower low.  but why this supply zone not work. am i wrong or  can you explain me in more details.

Thanks

Response:

About your query…

The downtrend didn’t continue after breaking the low, as it didn’t surpass the swing low by a substantial distance.

This pattern indicates the bank traders might either be cashing in profits from their existing sell trades, or are placing new buy orders in the market, driving price to reverse and move upward. While we can’t determine which scenario it’s likely to be until the market rises further, my current opinion leans towards the latter.

Now, if the highs, which formed at similar prices, were created by banks initiating sell trades (planned for long-term), we would’ve seen the market continuing its downward movement post the formation of the new low.

Interestingly, it began climbing shortly after the new low was marginally broken… a sign any sell trades placed by bank traders, creating those highs, must be closed by now.

The uptick could potentially be their strategy to introduce more sell orders at the point where the highs formed. However, the lack of a sizeable bearish engulfing candle when the market revisited the highs suggests otherwise right now.

In terms of the supply zone you’re referring to, could you clarify?

Do you mean the one drawn from the closely formed highs or the one at the peak of the significant drop?

As for marking recent support and resistance levels, I don’t have a hard and fast rule, per se.

If pressed, I’d recommend focusing on levels deduced from the past 10 days’ price action on the 1-hour chart. The levels you’ve identified in your image seem fine. Just bear in mind that major round numbers and the 500 levels are key points where large reversals usually begin.

So, no matter what, keep them marked.

Happy trading…

PAN.

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