Market Commentary 05/02/16

EUR/USD – Trend Still Intact ?

Friday saw the release of the NFP, for the most part we did not get the big reaction I was an anticipating.

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On days where big economic news is getting released it common for there to be very few trading opportunities.

Today was different, a potential trade entry presented itself when the NFP came out.

Before the NFP came out there were a collection of buy stops above the high of the bearish pin bar, when the NFP was released the market ran these buy stops and proceeded to move lower over the next few hours.

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This is what the open order graph looked like before the NFP came out.

You can see there were a high percentage of buy stops located around the 1.12400 – 1.12500 levels, it’s likely these stops are from the traders who were selling when the market began drifting lower ( marked with a brown box in the previous image )

When the NFP came out, to begin with the market shot up, hitting the buy stops in the process. This then led to the market falling lower, eventually encountering resistance around the 1.11100 region.

 

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This is what the open orders graph looked like after the release.

We can see after the large decrease in buy stops ( marked with a dot ) after the NFP came out and hit the 1.12400 – 1.12500 prices.

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Tomorrow I would keep an eye on the demand zone marked above.

This is the main barrier in the way of the market moving lower, if the market runs into this zone tomorrow watch for a bullish engulfing candle inside the zone, if the market moves higher from where its at now, I would expect a small pullback around the source of the NFP downmove.

 

USD/JPY – Moves Lower After Stop Run

We saw similar price action on USD/JPY as we did on EUR/USD.

The image below is what the open orders graph looked like before the NFP was released, notice the large collection of sell stops around the 116.50 level.

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Here what things looked like on the 1 hour chart.

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When the NFP came out initially the market spiked lower, breaking the low which had been made earlier that day.

The spike lower accomplishes two things:

First it runs down into the sell stops of the traders who brought in the brown box, these are the stops we can see on Oanda’s graph at the 116.50 level, when the market hits these stop losses the traders who placed them lose money. Second, the spike lower leads alot of traders to believe a breakout is taking place, this means a significant amount of sell orders enter the market.

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Here’s what the open orders graph looked like after the spike had taken place.

You can see a huge reduction of sell stops, the majority of the sell stops had been hit almost all the way to the 116.00 level.

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Going Into next week I would assume a pullback will take place, probably back up to the resistance level marked above. At the moment we are at the source of the previous up-move ( marked with a brown box ), its likely there will be some buy interest down here from the professional traders who want to take some profits off their existing sell positions.

For now, keep an eye on the resistance level marked on the image, if you see any price action signals around this level don’t hesitate to take them.

 

AUD/USD – Pullback ?

Whilst the NFP had little impact on the price of EUR/USD and USD/JPY, on AUD/USD the release caused significant downside.

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The wick on the candle of the release is a stop run, this would be confirmed by the order book if it were not for the fact that the open order data on Oanda is only reliable for the EUR/USD and USD/JPY currency crosses as these are most popular currencies traded by the users of Oanda.

 

The upper demand zone we identified on Thursday failed to produce any meaningful reaction from the market, a small move up was quickly flattered by the down-move caused by the NFP.

Tomorrow I think the market will continue to fall, the lower demand zone marked on the image is the most probable place for buyers to come in. I think the market will likely have trouble breaking this zone as its the place where the whole up-move originated from.

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