Market Commentary 03/04/17

EUR/USD – New Lower Low

The drop which caused the market to break through the demand zone last week has continued today, with the market making a new lower low just after re-opening last night, and another low around mid-day. Even though two new lower lows have been made, the fact that they have both failed to break the previous low by a large distance suggests that we could be seeing a possible base for a retracement form in the market.

If a retracement does occur, the supply zone found closest to the current market price is the zone you need to keep an eye on for an entry into a short trade, as it’s the most recent point in the market where the bank traders have got a large number of their own sell trades placed. If a sharp drop occurs and pushes the market down, the highs which have formed today and last Friday will become the most recent points where the banks traders have got sell trades placed, which means you can mark a supply zone around them to start using to watch for entries into short trades.

 

USD/JPY – Continued Fall Suggests Reversal

Last Friday we saw the market fall slightly after moving up and breaking through the supply zone which formed a couple of weeks ago. Today we have seen the slight fall become bigger, and push the market down to a point where I now think we could be seeing a reversal back down to the current lows take place.

The slight drop has created a supply zone we can use to look for entries into sell trades, but it’s only a valid zone if the market continues to fall and breaks through the low I’ve marked in the image. A break of this low would be a sign the bank traders want the market to continue falling down to the current lows you can see at the bottom of the image, and would give further confirmation the banks have got sell trades place to cause the supply zone to form. If the market fails to break this low and starts to move back up again, it’s a signal the slight drop is more likely to have taken place as a result of profit taking instead of trade placing, and you should start monitoring the market for entries long.

 

AUD/USD – Moving Higher From Current Low

Today we have seen the drop out of the daily supply zone continue, but over the past few hours we have seen a move higher take place close to the point where the current low is located in the market.

This move higher could develop into a reversal which pushes the market back up to the source of the drop out of the daily supply zone. It’s not possible to tell yet whether the drop out of the zone took place because the bank traders got some sell trades placed into the market, or if it was because they decided to take some profits off the buy trades they may or may not have got placed to cause the current low to form. I’m really not sure which it’s more likely to be at the moment, so my only advice for now is to just wait to see if the price falls and breaks the low or if it continues moving higher towards the daily supply zone.

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