There are many uses to calculating the Value Areas for futures contracts and Forex pairs. Depending on whether you start a session inside or outside of the Value Area, there are a variety of trade setups that can be derived from knowing where the Value Area High and Value Area Low of the session are located.
However, sometimes a lesson can be learned in just seeing how much a symbol uses a Value Area when there isn’t much going on. We started this week of with Japan closed for the first three days and the UK closed for the first day. This means that trading activity and the number of participants would be low. While that can have different impacts on the various pairs, if you look at some of the other symbols, such as the NZDUSD, what would you expect?
My personal expectation would be that the NZDUSD wouldn’t see a lot of action if banks in Japan and the UK are closed. It isn’t like people decide to trade the NZDUSD instead.
So let’s have a look at the NZDUSD with a variety of key support and resistance levels drawn from our open on Sunday. The light blue, or cyan, lines in particular are what we want to focus on here as they represent the Value Area High and Value Area Low. The area between these two are where 70% of the action occurred in the prior session. When you open inside the Value Area, it takes some volume and activity to break out of that range, and with so many of the global banks closed, we wouldn’t expect to see that. So here’s the chart:
Note that the pair used the early part of the session finding support at the Value Area Low, and then later headed up and stalled out right at the Value Area high at point B. In fact, except for a brief spike at A, the NZDUSD spent the whole session exactly inside of the Value Area.
Even if that doesn’t provide the specific trade call setup that we often use with the Value Area, it certainly demonstrates the validity of the numbers even in a dull session.
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