Market Commentary 31/05/16

EUR/USD – Retracement Continues

The retracement which began yesterday has continued today after a small drop took place early this morning.

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The bearish candles we are seeing now are a signal that the retracement may be coming to an end, we need to see a significant bearish engulfing in order to confirm this and we also need the low of the demand zone to be broken. The demand zone stays valid for trading because we cannot be sure if the retracement has been caused by profit taking or by banks placing buy trades.

In either case the demand may provide another move up if the market returns which means we might be able to catch a few pips if a long setup presents itself.

 

USD/JPY – Market Having Trouble Making New Highs

Yesterday we saw some profit taking enter the market after it had made big move up, today that profit taking has continued and we could see more downside if the current low is broken by a bearish large range candle.

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Currently we are seeing selling enter the market, if this selling continues it could cause a reversal and the price could drop by a significant amount. I order for this to be confirmed the low needs to be broken with the bearish candles managing to close past the low.

If the market only manages to breach it by a small amount then there is a possibility of the price moving back up and a consolidation taking place. At the moment we just need to wait to see how things develop over the next few hours, a break of the low may create a supply zone we can use to look for a short trade into the downwards momentum, on the other hand if a move up take place which penetrates the highs of the profit taking then the upside momentum would be re-established and we’ll need to be looking for points to place long trades.

 

AUD/USD – Sharp Move Higher

In my last post we saw the market move higher after hitting the demand zone which may or may not have caused the move higher itself  ( read the post for reasons why ) Last night a significantly larger move higher occurred because of the building approvals news being released.

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The fact that the move higher has only just managed to break an old high found where the banks had placed sell trades previously suggests the market could be entering into a consolidation as the banks might be placing more sell trades onto this current move higher.

A move lower is need to confirm this but it’s looking likely due to the bearish engulf which formed earlier and the bearish pin bar which formed an hour ago.

Tomorrow watch for a move lower to occur, if the market is in fact entering into a consolidation it should bounce upon reaching the lower boundary where we have seen buying enter the market on two previous occasions so the best trade entry should be found around these lows.

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