EUR/USD: All Significant Supports EXPLAINED

The EUR/USD is pushing upwards like crazy. It made over 400 pips just in eight days! An interesting thing is that there were eight consecutive bullish Daily candles (all green). Not a single pullback! This is a sign of strong and aggressive buyers. Even a blind person can see this.

How to trade in a trend

The main intraday trading strategy in such a situation is to wait for little pullbacks and enter long trades at supports.

In this article, I will focus mostly on those supports.

When there is an uptrend like now, it is best to use the Flexible Volume Profile to look into the volumes and how they were distributed throughout the uptrend.

What you are looking for are significant Volume Clusters. A Volume Cluster created within an uptrend tells you this: There were a lot of buyers adding to their buying positions there. Then they pushed the price even higher.

How does that help? When the price makes it back to a Volume Cluster then there is a solid chance that those buyers will become active again and that they will try and push the price upwards from this Volume Cluster.

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The current situation on the EUR/USD

Let’s now have a look at the EUR/USD and examine all the Volume
Clusters one by one. Below, you can see a 30 Minute chart of the EUR/USD
with all significant Volume Clusters numbered #1 to #5.

#1 Volume Cluster

This one was created close to the beginning of the new strong buying activity. What i like about this one is that the volumes are distributed in a way that there is no doubt where the support is (Volume Cluster is nicely visible and “sharp” looking).

#2 Volume Cluster

This one is a bit weird one. There was a bit of sideways price action and then the price shot upwards. What happened an hour later was that there was a little pullback. This pullback went almost into the Volume Cluster zone.

Now it seems that those volumes have already been tested by this (support is no longer valid). Maybe it will still work but it would be the 2nd test and 2nd tests don’t have as good win rate as the 1st tests.

#3 Volume Cluster

I liked this one and I was looking forward to trading it. However, the price went quite close to it and then made a strong buying reaction. It seems that this support is also spent (tested).

My general rule is that a level is tested if price turns 3 pips or closer before reaching it. In this case, it was a bit more than 3 pips but given the higher volatility we see on EUR/USD now I rather discard this level because to me it just looks already tested.

#4 Volume Cluster

This one is already spent. The price made a nice pullback to it, and there was a 30 pip reaction. This support is no longer valid because the price has already reacted to it.

#5 Volume Cluster

The last Volume Cluster got created yesterday. What I like about it is that a really aggressive green candle shot from it. BTW that’s what I like to see in all volume-based support/resistance levels.

Now the price rotates above this support. This means that the market participants accepted the higher prices. This is important because if there was a sharp rejection of higher prices then it would mean higher prices weren’t accepted and that price won’t tend to return there.

But now, if there is a pullback into the 1.1119 support, then it is likely that the price will bounce from there and go upwards, back into the current rotation (current balance).

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I hope you guys liked this Volume Cluster analysis. Let me know what you think in the comments below!

Happy trading!

-Dale

How Deep Can The EUR/USD Drop?

All eyes are on the EUR/USD again. The reason is that it broke all significant supports and it is under strong and constant selling pressure since the beginning of this month.

Is there a way to tell where this strong downtrend might stop and possibly turn?

Yes, there is! But we need to have a look at higher time frames – weekly or monthly. Why? Because we need to see the price action and volumes that were in this area in the past.

The last time EUR/USD was as low as it is now was in 2017. For that reason, we need to look into this area and try to find something to hold onto there.

What happened in 2017…

2017 was a trend year. First, there was a few months of rotation from the end of 2016 to the beginning of 2017. Then a massive uptrend started and lasted almost a whole year.

Now, I am interested in how the volumes were distributed in this area. When I use my Flexible Volume profile on the 2017 uptrend, then it shows this.

EUR/USD, Weekly chart:

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In the screenshot above you can see that I marked a significant volume cluster area from beginning of 2017.

What this tells me is that there were massive volumes accumulated there. Then the trend started.

Trend started with a gap

If you look closely, then you can see, that it actually started with a gap! An interesting thing worth pointing out is that sellers were not able to close this gap! The buyers were just pushing too hard. Scenario like this is very rare and it shows the power of buyers.

So, we have heavy volumes at the bottom, then a gap which did not get closed and then one year of an uptrend.

Heavy volume cluster in 2017

The buyers who started this crazy uptrend in 2017 were initially building their buying positions in the rotation I marked. From there they were pushing the price upwards.

Currently, after almost three years the price is heading back into this area.

What is going to happen? This is trading, we can never be sure, but chances are that there could be a buying reaction from this old volume cluster (around 1.0600).

The reason for that is that the buyers who were there in 2017 could become active again and cause another strong buying activity. This would stop the current sell-off and it could eventually turn it into a new buying activity (an uptrend).

Also the sellers who are currently pushing the price downwards probably won’t want to risk a fight with the buyers from 2017 and they will quit their selling positions.

They will most likely do so at the volume cluster from 2017.

When a seller gets rid of a short position he needs to buy (go long). This also helps to push the price upwards.

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If you liked this long-term EUR/USD analysis, you may want to check out two older articles, where I predicted and traded this strong sell-off on EUR/USD:

EUR/USD short – trade description and strategy

EUR/USD short – how I made +1.600 pips on this single trade

 

I hope you guys liked this analysis. Let me know what you think in the comments below!

Happy trading!

-Dale

The Last Support Before EUR/USD Hits Its 3 Year Low

All eyes are now on EUR/USD!

Why? Because EUR/USD is by far the most traded currency pair and it is pretty near its 3-year low!

Let me now show you what I think about this development.

The BIG picture

The first important thing to notice is the big picture.

If you draw Volume Profile over the whole previous year 2019, then you can easily tell it is D-shaped.

A D-shaped profile tells us, that buyers and sellers are in a temporary balance.

So, 2019 was in balance and now the price gets very close to the low of previous year (heading outwards of the D profile).

In a case like that, it is more likely that the price will turn upwards and go back into the range of the D-shaped profile (back into the balance).

Why? Because around 70% of all the time, markets are balanced! I talk about this more in detail in my new Video Course.

EUR/USD, Daily chart:

Now, I am looking for some supports to go long from because I think EUR/USD is more likely to turn upwards again,

Best thing to do is to draw the Volume Profile over the price action area, where the price is heading now.

This means that in this case, I will draw the Volume Profile over the strong rejection of lower prices that occurred in November 2019. Because this is where the price is heading now.

I am looking for some significant Volume Cluster standing in the way (this would mean there is a volume-based support)

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The last volume-based support is breached

In this case, there is no Volume Cluster standing in the way!

The last one was around 1.0980. Price reacted to it several times, but then it got breached.

This means that now, no heavy volumes stay in the way!

This is important!

EUR/USD, Daily chart:

Does this mean that EUR/USD will drop?

Well, not necessarily.

AB = CD setup

There is one particular Price Action setup which I like to use and which often works like a charm. Especially on Daily time frame.

It is the AB = CD setup.

BTW I talk more about this setup more in this post from 4th February 2020:

AB = CD trading setup EXPLAINED

So, if you look on the Daily chart of EUR/USD, then you can notice a nice wave-like movement it did in the last +-30 days.

This wave-like movement created a very nice AB = CD formation.

EUR/USD, Daily chart:

This formation shows the point D which is exactly where the price is RIGHT NOW (1.0913).

The point is that if the EUR/USD is to turn upwards, then according to my analysis it needs to happen NOW!

If not, then I expect to see another sell-off of hundreds of pips.

Happy trading!

-Dale

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