Market Commentary 10/11/16

EUR/USD – Falling Into Daily Buy Zone

EUR/USD has continued to fall today after yesterday’s large drop lower due to the US election. The market is now right at the edge of the daily buy zone where I expect we’ll see a retracement take place once the market has fallen deeper into the zone.

aviary-photo_131232640992128609You can see from the image how a small retracement took place last night. This retracement is likely to have been caused by the bank traders taking profits off the sell trades they placed to cause the large move lower to occur yesterday morning. The fact the retracement was only small suggests the banks did not actually take a large amount of profit off their trades, this might be because they are waiting for the market to fall even lower so more sellers enter the market which they can use to take more profit off their trades.

The supply zone I’ve marked on the image is a point where I think you should watch for entries into short trades. This supply zone is the most recent point where the banks got sell trades placed, if they haven’t been able to get all of these sell trades placed they’ll make the market move back up to the supply zone in order to generate buy orders which they can use to get more sell trades placed.

 

USD/JPY – Climbing Into Daily Supply Zone

Today we have seen USD/JPY climb into the daily supply zone which formed back on the 21st July.

aviary-photo_131232652825263407I’m confident we’ll end up seeing the market break through this daily supply zone, but it’s likely some kind of small retracement will take place before that happens. Right now we are seeing some bearish price action enter the market, this is probably from the banks taking profits off the buy trades they got placed during yesterday’s swing lower. A demand zone formed early this morning after a small retracement which began last night came to an end, this demand zone is a point where you want to be looking for entries long due to the fact it has likely been created by the bank traders placing long trades.

If the bearish price action we are seeing now continues, we could see the market fall back to this demand before moving higher again. If this is the case watch for bullish engulfing candles to form inside the zone before going long.

 

AUD/USD – Large Drop After Almost Hitting Supply Zone

The supply zone which formed due to yesterday’s drop was almost hit earlier today and now the market has fallen all the way back down to the lows created by yesterday’s drop.

aviary-photo_131232663282622702You can see from the image how close the market came to hitting the supply zone that formed from the drop. Even though the market didn’t enter the supply zone it was still possible to get a short trade placed due to the bearish engulfing candle which formed an hour after the zone was hit. The problem with placing a sell trade upon seeing the engulf was the size of the stop you would have had to use.  If you had entered when the bearish engulfing candle had just closed and put your stop above the high of the candle which spiked the supply, your stop loss would have been 51 pips which is quite a lot if you only have a small amount of money in your account.

With the market now falling again I think wont be long before we see the price drop into the daily demand zone seen at the 0.75512 – 0.75032 levels. I think some kind of retacement will end up taking place once the market has entered this zone so that might give us a signal we can use to get a short trade placed.

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