Market Commentary 10/03/16

EUR/USD – Well That Was Weird…….

We have seen dramatic movements in the price of EUR/USD, the combination of the ECB press conference coupled with the unemployment claims created unprecedented volatility in the markets.

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We saw yesterdays move higher from demand get engulfed lower before the news came out, when the news was released the market made a huge drop lower, this move made thousands of traders go short.

Looking at the open positions graph an hour before release we can see how the amount of people who were in long and short trades was relatively similar.

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Now take a look at the graph below, this was taken an hour later.

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Notice how there is a missive decrease in the traders who held open long positions, and there are now a significant amount of traders short between the 1.0820 – 1.0880 range in addition to the traders who were already short before the news came out at the  1.0950 – 1.0980 range.

When the market began moving higher all of these traders were forced to close their losing trades, this is what has pushed the market up so far.

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Here is what the open positions graph looks like now.

It’s obvious to see the majority of traders who went short have closed their trades, the people who remain short still believe the market has the potential to move lower, if the market continues higher these traders will eventually close their trades as well as the pain of having a loss which is getting bigger a bigger will become too great for them to cope.


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It’s likely tomorrow will be a down day due to bank traders taking profits on long positions, the level marked above isn’t a support a level but its a place where I think the market will stop when it begins to fall.

When there is large movements like this in the market its common for traders to get in late into the move, the small candle you see at the top of this move is retail traders getting long into the market, the line marks the point where we first begin to see these small candles, if the profit taking from the banks pushes the market down then its likely for the market to turn here due to the fact that it would make all the late retail trader close their trades, putting sell order into the market which the banks can see to place more buy trades.

 

USD/JPY – Bearish Pin Bar On The Daily Chart

 

We also saw some big moves on USD/JPY today although they were much smaller compared to what we witnessed on EUR/USD.

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The market continued its move higher over last night and this morning, it was beginning to look like the market may break the highs at  114.544 then the news came out and the outlook changed considerably

After initially making a large move higher the market began to fall as traders digested the impact the news was to have on the market.

This move down has created a large bearish pin bar on the daily chart, I have a feeling this pin is likely to push the market lower, not only is it a perfect pin in terms of wick and candle body but it is also a news event pin. pin created by news events have a tendency to work out successfully as the move that creates them is caused by pro traders making retail traders lose money.

 

AUD/USD – Spikes 1 Hour Demand

 

AUD/USD had begun moving lower from a 1 hour supply zone created yesterday when the market fell.

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The demand zone I told you to watch for price action signals was broken by the move down, when the market made a new low it was obvious the momentum had switched, and the focus was now on looking for entries short into this new momentum, the supply zone found at the high of the move down was the first place the market returned to after making a new low.

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Unfortunately it would have been difficult to get a decent entry into this trade, whilst there was an engulfing candle on the 5 minute chart the candle itself was so large that the risk reward ratio of the trade had declined significantly.

Going into tomorrow we need to keep an eye on the demand zone marked at the beginning of the week, the market has hit this demand twice it seems like it’s a good area of support, if the market manages to break this zone it would be open to a move lower, for entries short the resistance level is the most likely place for the market to turn, watch for a bearish engulf around this point.

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