EURUSD 4-08-07

4-8-07

EURUSD

The long trade in the EURUSD from the 1.3320 entry was closed on Friday at 1.3369. The stop loss could have been higher to lock in more profit on the original trade, or a bit lower to keep the long trade open. The 30 weighted moving average trailing stop loss would have closed you out near 1.3418 and, in the future, I will resume using that on part of the position. On the bottom, the 1.3375 area of demand extended down to 1.3360, so my stop should have been at 1.3359 instead of 1.3369. The 1.3320 long trade would still be open if that were the case.
The EURUSD is a classic example of supply at the 1.3440 level exceeding demand, and demand at the 1.3375 area exceeding supply. The EURUSD attempted to absorb the supply by basing for 9 hours near the 1.3440 area before slipping below 1.3421. Once that happened, the EURUSD based between 1.3412 and 1.3424 for another 9 hours until the NFP report. It rallied up to 1.3426 when the report was released, and then sold off to the 1.3375 area of demand. Once the EURUSD reached the 1.3375 demand level, the selling slowed, and the process of absorbing the demand at that price level began. The potential for a trend move results once an area of supply or demand is absorbed. If this 1.3375 area of demand is absorbed. the next area of demand is at 1.3356 followed by an area of demand at 1.3339. Neither of those areas is fresh, so a move lower is possible which will resemble a downtrend. On the flip side, any of those areas of demand could reverse the EURUSD higher with this 1.3375 area being the most likely to do so. If the EURUSD moves higher, I will trade the 1.3377 to 1.3414 range for the first part of next week since there will be areas of supply and demand to absorb at those price levels which will force the EURUSD into that trading range.