Return to Supply on EURUSD 5 Minute

Be tricky to have got into the first pullback due to Sunday market open.

000EURUSDM5

As for the second pullback we can see some absorption. If volume starts to build below, and we see a pullback or fresh demand, then it could go. Its not one automatically fade until we have followed the price action.

UPDATE:

It broke that supply (in fact an early supplier had been taken out and we can see the pullback).

00000EURUSDM5

Another ‘Pullback’ Trade EURUSD

Here is another of those ‘pullback’ trades. This time to demand. But its not that ‘clean’ looking possible due to a quiet trade time after the London close (6PM UK time – not a good time to trade)  and there not being much ‘headroom’ due to overhead five minute liquidity.

EUROUSD

Also ‘sources were reporting ‘note offers’ at 1.146 (just off the chart) so price was probably chasing after that.

Options Barrier : EURUSD

When I wrote my previous post about ‘Trading the pullback’ was unaware that the ‘supply area’ was just below a major 731 million options barrier (the red line).

Options Barrier EURUSD

Note: I’ve marked the option level slightly too low in the above graphic (1.4450 rather the correct 1.450)

Also I mentioned the EURUSD might be pulling back to go higher, look how it pulled back again for another ‘liquidity fix.’

options

I don’t thoroughly understand options trading fully, only that that option expiries for the New York ‘cut’ are generally publicised on numerous FX websites. Also these option levels can act like magnets to price. I get mine from Talking Forex (costs about £20 a month). Forex Live website also posts them (but not always.

Trading The Pullback

I see this pattern over and over and over again. And it doesn’t just work with supply (bearish) but with demand (bullish) situations.

Always trade the pullback into supply or demand. Why? You don’t really know its a supply or demand area until you see a reaction to it!

supplyEUR

This little reversal could have bagged you 20 pips on the $EURUSD, and 20 pips isn’t a bad little move. But bear in mind this is a contra trade on the 15 minute chart, considering the trend, determined by the long term guppy is upward and (arguably) price is pulling back and probably going to go higher.

Your stop would be a tight stop above the grey ‘supply’ area.

I will be posting more about supply and demand, and in this example I’m using an indicator. Now an indicator doesn’t highlight supply and demand properly but it does ‘simulate’ it quite well. What do I mean by that? Well a ‘supply and demand’ indicator will highlight pivot highs and lows, but these are not actual S&D areas, but pullbacks into S&D areas, which is why the kinda work.

Ideally you should manually identify areas of supply and demand on the chart