Market Commentary 05/05/16

EUR/USD – Demand Zone Failed, Price Now Dropping To New Lows

The demand zone failed to provide us with a small move higher and the price has nor dropped through the zone and is approaching the source of the large move higher we saw last Friday.

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The demand zone did cause the market to pause for a while last night but at the open of the London session at 7:00am this morning the price dropped considerably. The move lower has created two supply zone which we may be able to use to get a short trade placed into this momentum. Whilst I think the upper zone has a better probability of causing a reversal due to t being created by bank traders selling, I think there is potential for the lower zone to cause a move down if we see some profit taking enter the market tomorrow.

We must be cautious of the source of the up-move I’ve marked in the image, this move up which occurred last Friday was the point where the price first increased dramatically, on the previous three daily candles before this up-move took place there was still a lot of selling coming into the market and although the price was moving higher the price action was very similar to what we would see in a consolidation.

Because of this its my belief the bank traders were placing buy trades on the tree days leading up to the big move up, therefore if the price drops below the source of the up-move we could see the market reverse because of the bank traders placing more buy trades.

 

USD/JPY – Price Consolidating Below The High

 

The new high which was put in place yesterday has been broken but the price has not manged to close past the high and is now consolidating just below the high.

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It could be the reason why we haven’t seen a breakout to the upside yet is because the banks are getting buy trades placed in anticipation of tomorrows NFP release. If the release comes out positive for USD then we may see a significant move higher and the retracement will grow to be much bigger, if it com es out negative then we’ll see the market either break the current lows or move down into that region for a deep pullback to take place.

A deep pullback may be used the banks to take more profits off their sell trades, the orders which were present in the market when it was falling may not have been enough for the banks to take all the profits they wanted off their trades so another move down because of the NFP could give them the rest of the sell orders they need to take the remaining profit they have off their sell trades.

For now I recommended you stay out of the market until the NFP is released, if you have trades currently open make sure you move the stop-loss to breakeven before the news is released.

 

AUD/USD – Consolidating Before NFP Release

AUD/USD is currently in a small consolidation, I think this is partly due to bank traders taking profits and because of the NFP release tomorrow.

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There isn’t really much we can do at the moment, we have another RBA announcement coming out later tonight so that could cause a lot of volatility and then we also have the NFP coming out tomorrow afternoon which will cause even more volatility. For now I think its best to just leave AUD/USD alone until all this news has been released, once its been release we’ll have a better idea of the potential market direction next week and can plan our trades accordingly.

 

 

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