Market Commentary 02/03/17

EUR/USD – Back Inside Demand Zone

The demand zone which we had seen the market return to in yesterday’s post did end up causing a retracement to take place last night. Amazingly the retracement terminated almost exactly on the mid-point of the down swing, just as I predicted in yesterday’s market commentary. Although it did as I expected I didn’t actually take a trade when the mid-point was reached, as I was more focused on trading the reversal on USD/JPY which happened to occur at the same time.

With the retracement now over the market has fallen all the way back into the demand zone which caused the retracement to take place. I think another small up-move could develop from this demand over the next few hours, but I think it’s only a matter of time until we see the market continue to fall and break through the demand zone. For now I suggest you just continue watching the price action for entries short. There isn’t any technical levels which have formed from the drop back into the demand zone which we can use to look for entries into short positions, so the best thing to do for the moment is watch to see if the drop through the demand creates more levels we can watch for trades.

 

USD/JPY – Making New Higher Highs After Re-test Of Price Action Zone

Yesterday we saw the sharp move higher which had begun on Tuesday continue, with the market managing to spike just above the daily demand zone before my market commentary was published. The spike out of the demand led to a small retracement taking place, probably as a result of the bank trades taking profits off some of the buy trades they’ve got placed. As expected the retracement terminated inside the price action zone I had marked between the two lines. When the market entered the zone a bullish engulfing candle formed and caused the next move higher to take place today.

Now the market is inside the supply zone drawn from the 114.593 high. There’s a good chance we could see the market drop this supply and form a retracement over the course of tonight and heading into tomorrow. You can see some bearish price action forming now, so maybe this is the beginning of the drop itself ? If we do see a retracement form, I would watch for another entry long at the zone marked between the black lines. This zone originally marked the point where the retail traders started entering the market after the sharp move higher had taken place, but now we’ve had a drop and subsequent move back out of the zone it marks the most recent point in the market where the bank traders have got buy trades placed.

If they want these trades to remain open, we’ll see them come into the market and get more placed if a move back into the zone occurs, so watching for signs of these trade being placed, could provide us with a long signal if the price drops into the zone tonight or tomorrow.

 

AUD/USD – Large Drop Confirms Reversal

Today with have seen a large drop take place on AUD/USD. This drop has caused the market to break through the buy zone which has been causing prices to consolidate for the past couple of days. The fact the buy zone has now been broken, coupled with the fact that the move which broke the zone has been so big, is a sign that a reversal has now taken place in the market and we’re going to see further downside occur over the coming weeks.

The drop through the buy zone has caused a new supply zone to form which we can use to look for entries into sell trades, if the market moves back up to this point upon reaching the daily buy zone found at the 0.75100 – 0.75557 levels. I think this buy zone will definitely cause a retracement to take place, but I’m not sure if it will push the market all the way back up to the new supply zone we have seen form today. As it stands, I think waiting to see what kind of reaction the buy zone creates once the market enters it will go a long way into revealing whether or not we are going to see a move back up into the supply zone take place. If the zone causes a sharp up-move to occur then the chances are high that a move into the supply zone could manifest, but if the zone only causes a small retracement to occur with small bullish candlesticks making up the majority of the movement then I doubt a move back into the supply zone will take place.

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