Market Commentary 07/02/17

EUR/USD – Demand Zone Broken

The demand zone the market had just begun reacting to when yesterday’s market commentary was published has been broken this afternoon, and it’s now looking likely we’ll see the market drop into the buy zone either sometime tonight or tomorrow.

As expected the reaction caused by the market entering the demand zone was not very big. A small up-move did end up occurring but it was not enough to push the market above the high of the day. Once the up-move came to an end the market began to drop again, with the drop causing the market to break through the demand zone early this morning when the London trading session opened. With the demand broken a drop into the buy zone is now likely to occur, and I think this buy zone or the one found below between the 1.06038 – 1.05772 levels, is probably going to cause a large up-move to take place, maybe not one that will push the market above the current high made on the 2nd February, but one that will certainly make it move close to the supply zone drawn from the highs.

As for trades, I’d recommend looking for entries long in the buy zone seen in the image and the one found just below which I’ve mentioned above. These are the two most recent points where the banks have got a large number of their buy trades placed, if they wish to keep these trades open we’ll not see the market fall a large distance below them, so keep an eye out for signs of them getting more buy trades placed when the market falls into the zones.

 

USD/JPY – Moving Higher After New Low

Similar to yesterday, today we have seen the market make another new low, the only difference is this low has formed quite a large distance below the low we saw form yesterday, which suggests the three lows that have formed close to one another have not formed as a result of the bank traders placing buy trades to make the market reverse.

The new low is 40 pips away from the three lows I’ve marked with X’s and almost 100 pips away from the two swing lows that formed on the 17th and 23rd of January. The fact the new low is such a large distance away from these two lows also casts further doubt on the theory the banks are getting trades placed, unless those two lows were created by the bank traders closing out short trades that had been placed back in December. At the moment there’s no way for us to tell, so for the moment I’d say there is still a chance we could see the market reverse out of this daily demand zone over the next few days.

For entries short I still recommend you keep an eye on the sell zone created last week.

 

AUD/USD – Demand Zone Causes Small Move Higher

Today the market has dropped through the demand zone it had entered yesterday afternoon. The demand zone did cause a move higher to take place soon after the market had entered it, but this move did not cause the market to break through the high made last Friday, which suggests more profit taking is taking place in the market.

The drop which caused the demand zone to break has been quite sharp, which is usually a sign the banks are getting sell trades placed to make the market reverse, but I don’t think that’s what we’re seeing take place here, as I’d have expected the drop to be much larger than what we’ve seen so far with no retracements or up-moves taking place during the drop. I think there is a high chance we could see the up-move beginning now develop into a much larger up-move which pushes the market above the highs of the three drops out of the daily supply zone we’ve seen take place this week and last week. If this ends up being the case, mark a demand zone around the source of this up-move, as this will be the most recent point where the banks have got a large number of their buy trades placed and a point we can use to look for entries into our own long trades.

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