Market Commentary 13/10/16

EUR/USD – Sell Stops Building Up Below Current Low

Earlier today we saw EUR/USD drop into the daily buy zone it came close to entering yesterday, a small move out of the zone has since taken place and in the process a large number of sell stops have built up below the current low.

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If you read yesterday’s market commentary you’ll know that it’s my belief we are going to see a large move higher begin from this buy zone. I don’t think the move up out of this zone we have seen take place today is the start of the reversal, I think another move down deeper into the zone is going to occur before the reversal actually begins. Another move down makes sense too because it would cause the sell stops that have been placed at the current low to get executed which would allow the banks to get a large number of their buy trades placed into the market to cause the reversal to take place.

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Looking at Oanda’s order graph,you can see how the sell stops have built up in between the 1.0950 level and the 1.1000 level.  Although we don’t know exactly what price these stops have been placed at it’s more than likely to be just below the low of the move up as this is where most traders get taught to place their stop when placing a buy trade into the market.

I would watch for signs of a reversal when the market breaks through the low of today’s move up. Ideally what you want to see is a large bullish engulfing candle which dwarfs the candles seen before it or a sharp move higher which may not start with a bearish engulfing but does contain two or three bullish large range candles.

USD/JPY – Large Down-move Signals Beginning Of Potential Reversal

As I was in the process of publishing yesterday’s market commentary the market made a huge move higher through the daily supply zone and through the two swing highs that had formed from the market dropping out of the zone. At this point it looked like the market was going to continue moving higher but over the course of last night the market fell and by the time the London trading session had begun this morning, the market was trading all the back at the point where the up-move originated from.

aviary-photo_131208448989894980I think this drop is the beginning of the reversal which is going to cause the market to fall all the way back down to the daily buy zone found around the 110.000 level. The supply zone which has been created by the drop is the main point you need to be monitoring for entries short, the demand zone the market is in now is probably going to cause the market to move back up into this supply so be on the lookout for bearish engulfing candles to form when the market enters the zone.

AUD/USD – Demand Zone Broken, New Demand Created

The demand zone which I said to watch for entries long in yesterday’s post was broken by a move lower that took place in the early hours of this morning, since the zone was broken the market has moved up again and created another demand zone which could signal the beginning of a reversal back to the upside.

aviary-photo_131208480300562374You can see the demand zone which ended up being broken was broken by a bearish large range candle which caused the market to drop through the zone. A bullish candle did appear an hour later, but did not cause any up-movement to take place. The demand zone which has formed today does seem more likely to cause a reversal due to the fact both EUR/USD and USD/JPY have now shown signs of reversing so I would be on the lookout for a bullish engulfing candle to form when the market falls into the demand zone.

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