Market Commentary 11/01/17

EUR/USD – Demand Zone Broken

Yesterday we saw how the market had failed to break a large distance past the high made last week. The fact the high wasn’t broken by a large distance, meant that it was still tough to figure out which direction we should be trading in, because on the one hand you could make an argument the market was going to continue moving up past the high, but on the other hand you could make a case it was now going to fall back to the demand zone. I said the demand zone would be valid for trading if we saw the market move up and break through the high again, but this hasn’t happened, and instead the market has broken through the demand zone and  is now making it’s way down towards the buy zone that’s formed at the bottom of the last swing up.

You can see there was a little reaction to the demand zone just before the market dropped into it this morning. This reaction was only small, and was not typical of the kind of reaction you’d expect to see if the market was going to reverse out of the demand zone, so it didn’t really mean much when it took place. The focus now I think is on getting short trades placed into the move down into buy zone. I’m not sure if we’re going to see the buy zone broken by this drop, but I think we will see some kind of reaction take place when the market enters the zone, so we’ll have to monitor this reaction to gauge whether a move back up to the sell zone is likely, or whether we’ll see the banks place more sell trades into the market before the sell zone is reached.

 

USD/JPY – Moving Towards Supply Zone

Today we have seen USD/JPY rise up out of the buy zone it fell into for a second time yesterday morning, and begin moving up towards the supply zone we know might have been created as a result of the bank traders placing sell trades to make the market reverse.

At the moment we still can’t confirm whether the supply zone has formed from the bank traders placing sell trades or from the bank traders taking profits off long trades. All we know is that if the market breaks through the high of the supply zone by….. I’d say 50 pips, it’s unlikely it’s formed as a result of the bank traders placing sell trades, because they wouldn’t get two sets of sell trades placed at prices that far away from one another.

I think if we don’t see the market continue moving back into the supply zone a drop back into the buy zone is likely to occur, but I think this drop could end up breaking the buy zone, due to the fact each rise out of the zone we have seen take place so far has not managed to break beyond the point where the banks might have got a large number of their sell trades placed, suggesting that they want the market to continue falling instead of rising. In my opinion I think you should continue monitoring the supply zone to see what price action forms when the market enters the zone. If there are signs the banks are getting more sell trades placed into the market in form of a large bearish engulfing candle, it could be a signal we are going to see the market begin falling back towards the buy zone.

 

AUD/USD – Falling Back Towards Demand Zone

The market continued moving past yesterday’s high after I put out my market commentary, which meant the demand zone that formed yesterday was valid for trading if the market had returned to it today. Unfortunately the market did not beak the high by a large distance before falling again, this to me suggests the bank traders are taking some profits off the buy trades they’ve already placed to get more buy trades placed into the market. If this is the case they’ll look to get more buy trades placed around the same point as where their most recent set of significant buy trades were placed, which is the point where demand zone two marked in the image formed.

I suggest you watch for entries long at this demand zone and not the one above, as that has only been created by the bank traders placing a small number of buy trades into the market. I think if the market makes another move up past the high made today and actually closes fully beyond the high, the demand zone created yesterday is safe for you to trade, as the move up would go some ways in confirming the banks have got more buy trades placed into the market at the point where the demand zone formed, which makes the demand zone more relevant in the market.