Market Commentary 25/10/16

EUR/USD – Falling Deeper Into Daily Buy Zone

As expected EUR/USD has today dropped back into the daily buy zone which caused the small retracement to occur yesterday morning.

aviary-photo_131218787672131593I still think we are going to see the market drop deeper into the daily buy zone before it reverses and moves back into the daily supply zone. The sell zone created by today’s drop, is a point where I expect to see some down movement occur once the market has fallen deeper into the daily buy zone. It could end up leading to the creation of a second swing down into the daily buy zone as typically multiple swing lows will have formed before a market reverses from moving down to moving up.

For now just wait to see what the market does tonight, if by tomorrow the market has dropped deeper into the zone be on the lookout for signs of a reversal taking place in the form of a large bullish engulfing candle or a sharp move higher which consists of bullish large range candles.

 

USD/JPY – Sell Zone Broken By Large Move Higher

The sell zone which I thought would cause the market to move down into the demand zone created yesterday has been broken by a large move higher which began a few hours ago.

aviary-photo_131218795605029558The market spent most of the morning consolidating inside the sell zone, it was only when the US trading session began at 12:00pm that we saw the market move deeper into the zone and break through it a couple of hours later. Due to the fact the consolidation took place during three of the major trading sessions, it leads me to believe the reason the consolidation formed was because the bank traders in each respective trading session were getting their buy trades placed into the market to cause the move up to take place.

If the market comes back down to the point where this consolidation formed, it could be a sign that some of the banks were not able to get all of their buy trades placed during the time the market was consolidating. They might be making the price drop to entice traders to place sell trades which they can use to get their remaining buy trades placed.

Over the next couple of days watch for a move into the area I’ve marked between the black lines. If the market falls back into this area and produces a large bullish engulfing candle, it’s a strong sign the banks have purposely made the market fall back into the area to get more of their buy trades placed. The bullish engulf will be the main signal which indicates that these trades have been placed which means a move out of the area is likely to develop shortly after.

 

AUD/USD – Inside 1 Hour Sell Zone

AUD/USD did end up returning to the supply zone which caused yesterday’s move down to take place. So far the market hasn’t really dropped out of the zone and judging by the current price action it seems as though the market might actually break through the zone and move back into the daily sell zone this current move lower originated from.

aviary-photo_131218816847399811A couple of hours ago the market did attempt to drop out of the sell zone but the move ended up failing and what we were left with was a bullish pin bar. If the market does manage to break through the zone and begin to move higher I’m not sure where the move might end. The supply zone seen inside the daily sell zone is still a place where I would look for an entry short but I feel as though if the market is going to move down to the daily demand zone it will reverse before the supply zone seen above is reached.

At the moment I think it’s best to monitor what the market does with this sell zone. If the this hour ends with a large bullish candle like I’m seeing form now then I think it’s likely the sell zone is going to be broken and the market is going to move higher. If the candle for this hour ends with a large wick on it, then I would hold onto any sell trades you’ve got placed at this sell zone as there is still a chance the market may fall out of the zone.

 

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2 comments

  1. Iggy

    Hi, I beleive the drop in USDJPY happened after you wrote the comments. When I check DXY (Dollar index) I noticed that has reversed strongly from D1 supply 98,95-99,85 formed on the begining of february 2016, a few days before equity markets reversed (after G20 (or G8 doesn’t matter) acted…..) Although I agree with you that on those levels there aren’t pending orders from big boys, but I strongly belive that they react when price reach such levels. Is this because they have some fundamental reasons or just tehnical but on those levels we should take a care….
    Hope I don’t boder you to much
    Stay well and lucky trading,
    Iggy

    • ForexMentorOnline
      Author

      Yes the market began to drop literally as I was about to press the publish button. I couldn’t be bothered to go back and rewrite my analysis so I just left it as it is. As for the level you mention I would have to take a look at it myself to see why it’s formed. Your right though there will be times when past levels seem to cause the market to reverse. Sometimes it’s just because the market has reached a point where there are enough people short or long for the bank traders to make a lot of money by pushing the market in the other direction, in cases like this it seems like the reason the market has reversed is because of it encountering a past technical level like a supply or demand zone or a support or resistance level, but the reality is it’s just because there are enough people now in the market for the banks to cause a reversal and make themselves are large profit.

      Enjoy the rest of your day

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