Market Commentary 02/08/16

EUR/USD – Sell Zone Broken By Move Higher

The sell zone which the market was consolidating inside yesterday has now been broken by a move higher.

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The break means that it’s unlikely the banks are getting sell trades placed at the zone. I think a move up to the high of the drop caused by Britain’s exit from the EU is now possible so the priority is on getting buy trades placed to capture this swing higher. The banks buy zone I’ve marked is the closest area we can use to look for potential long trades, this area is the last point the banks came into the market and placed a large number of buy trades a return to this zone could cause them to enter the market and place more buy trades to protect their positions.

 

USD/JPY – Falling Lower After Retracement

USD/JPY has fallen today after spending most of yesterday in a consolidation/retracement

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The drop means the banks must have been placing sell trades during the retracement, the way they were able to do this was using the buy orders that were generated by the late short traders liquidating losing positions.

The reason the market stopped falling was because of the bank traders taking profits off short trades placed earlier on in the move down, their profit taking consumes all the sell orders coming into the market from traders placing sell trades, this makes the price move up and causes the traders who sold late to close their trades at a loss which puts buy orders into the market the banks can use to get more sell trades placed.

We need to be watching the two zones marked in the image.

The sell zone is important as it represent the most recent place where the banks have placed sell trades, and like EUR/USD they may want to sell again if the market comes back into the area.

The zone found below the current market price is a place where the banks placed the majority of their buy trades which caused the move up to take place, these trades are almost certain to have been closed by now but there is still a chance we’ll see a reaction upon the market entering the zone as the banks will look to take a larger amount of profit off the sell trades they already have placed.

 

AUD/USD – Large Move Higher After Falling Into Demand Zone

Last night AUD/USD started to fall as the banks looked to take profits off the buy trades placed at the bottom of the move up.

Aviary Photo_131146275199400188The fall caused the market to drop into the demand zone which formed because of the bank traders placing buy trades. Once the market had hit the zone the banks decided to place more buy trades which is what has caused today’s move higher to take place.  You can see how the three swing lows where the banks have placed their buy trades are all close together with the swing low made today only managing to spike a short distance through the others.

This just shows how the banks trades are always placed in a range where they are close together.

This past hour has seen some profit taking enter the market in the form of s bearish engulfing candle, it’s likely the engulf will cause a small move lower over the next few hours before the up-move gets back underway, until this happens there isn’t really any levels we can use to look for opportunities to get long so for the moment all we can do is wait.

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3 comments

  1. Marcel van de Kerkhof

    Hi, at the USDJPY chart you’ve marked the last consolidation as a place where the bank placed sell orders and not as a place where the bank has taken profit of their previous sell trades since the current decline is not at the very early stage anymore. Can you specify why?

    Thanks, Marcel

    • ForexMentorOnline
      Author

      Hi Marcel

      The consolidation formed because of the bank traders taking profits off sell trades, there’s no way to know where the sell trades they are taking profits off were placed but we know they were placed at some point before this consolidation formed. Now the reason why the market fell from the consolidation is because the banks have placed more sell trades using the buy orders that have come into the market from the traders who have closed losing sell trades at a loss when the consolidation started and the price moved slightly higher.

      Think about it like this: The consolidation started because of the bank traders taking profits, it ended because of them placing trades.

      Hope this helps

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