Market Commentary 10/05/17

EUR/USD – Demand Zone Broken By Move Lower

The demand zone which the market was reacting to when yesterday’s post was published ended up being broken last night. A move back into the zone did take place in the early hours of this morning, but now the market has dropped out of the zone again. The fact that it’s dropped out of the zone is a sign that maybe it’s going to reverse somewhere inside the larger demand zone which the smaller zone was contained inside.

From what I’ve seen so far I don’t think this downmove we’ve seen since the beginning of the week is the start of a complete reversal. If it was a reversal, I’d expect to see multiple swings form with their highs being found at similar prices to where the current high is located. We could still see these swings form if the market moves back out of the demand zone, but for the moment the market looks to me like it’s in a retracement.

For now I’d watch for signs that a reversal back up to the supply zone is going to take place. A sharp move higher or a large bullish engulfing candlestick which is much bigger than the surrounding candles would be a good sign a reversal is taking place, so expect to see a move up occur if they form in the market.

 

USD/JPY –  Profit Taking Entering The Market

After the large move higher we’ve seen take place over the past couple of days, it seemed inevitable that we’d see a retracement of some sort take place as the bank traders start taking some profits off the long trades they placed to cause the upmove to begin. Last night the retracement began, with a small downmove causing the market to drop until the London trading session opened this morning.

The market rose again after the London session had started, but fell back to the lows by the time the afternoon had begun. Now the price is rising again, but so far it doesn’t look like this move is going to cause the market to move back above the highs created by the retracement. As far as trades are concerned, I think for now it’s best to wait for more price action to form before looking for entries into long or short trades.

 

AUD/USD – Moving Towards Supply Zone

The drop through the current low we saw occur yesterday has not continued today, with the market instead moving back up towards the supply zone created by Thursdays drop.

I think this move up is likely to have been caused by the bank traders taking some profits off the sell trades they got placed either at the point where the supply zone formed or further up in the move down. It could be that they’re taking profits to purposely make the market move back into the zone as they weren’t able to get all of their trades placed when the zone formed initially. If this is the case, it’s likely we’ll see the market drop out of the zone when it enters, so I suggest that tonight and tomorrow you continue to watch the zone for entries short.

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