Market Commentary 09/05/17

EUR/USD – Reacting To Demand Zone

In yesterday’s post, we saw how the market had dropped after a small gap caused it to move higher when the market opened on Sunday evening. Today this drop has continued, and we’ve seen the market fall into the demand zone I said to watch for entries long. We have seen the market begin to react to the zone over the past couple of hours, but I don’t think this reaction is going to be enough to push the market back above the current high created by yesterday’s drop.

I think we’ll instead see another downmove begin when the market either reaches the halfway point of the downswing or the supply zone created by the drop. If it drops when it reaches the halfway point and moves through the big demand zone I’ve drawn, it’s likely to be a sign a deeper retracement is in the works, but if it moves up to the supply zone and then drops down through the big demand zone, it’ll suggest an entire reversal is in the process of taking place.

For now, I think it’s a good idea to watch for entries short inside the supply zone and around the halfway point of the swing.

 

USD/JPY – Large Move Higher Breaks Last Weeks High

Today we have seen a large move higher take place on USD/JPY. The move higher has caused the market to break through last weeks high and it’s now fast approaching the daily sell zone which formed from the drop that took place back in the middle of March.

The up-move has confirmed the demand zone marked with a question mark in yesterday’s post to be valid, as it’s a sign the bank traders have got buy trades placed at the point where it’s formed. I think over the next couple of days we’re going to see the market continue to rise and move back into daily sell zone that formed in March. This daily sell zone is a point where the bank traders got a significant number of sell trades placed. If they want these trades to remain open they’ll make the market reverse out of the zone by getting more placed when it enters.

This will likely cause a reversal structure to form on the 1 hour chart, so we’ll have to watch for that to form if the market enters the zone over the next couple of days.

AUD/USD – Friday’s Low Broken

The low which was made last Friday has been broken today, by the move lower that began when the retracement came to an end yesterday morning.

The break of the low suggests that we’ll see some more down movement take place over the next couple of days, if this turns out to be the case the supply zone created by the drop is a place you want to be watching for entries into short trades as it’s the most recent point where the bank traders could have got sell trades placed.

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