Market Commentary 14/03/17

EUR/USD – Retracement Continues

The retracement out of the sell zone we were seeing take place yesterday has continued today, but it’s looking like it could be coming to an end soon due to the appearance of a bullish engulfing candle an hour ago.

Although I think the engulf may signal the end of the retracement I’m not confident in using it to place a buy trade, due to the fact the engulf itself is not very large and some selling did take place during its formation, as evidenced by the small wick seen on the top of the candle. For now the outlook remains the same as yesterday. I don’t think the retracement is going to continue for much longer but until I see definite signs that it’s ending, I’m not willing to get a trade placed into the market, so at the minute I want to see some more price action form.

 

USD/JPY – Retracement Leads To Second Drop

Yesterday we saw the market fall towards to edge of the daily sell zone it had risen into at the end of last week. The drop did cause the market to fall slightly out of the daily supply zone but it was not long before another retracement took place and pushed the market back into the zone towards the supply zone which had formed as a result of the drop. Although the market didn’t reach the supply zone it has dropped again, and is now close to falling out of the daily supply zone once more.

The fact that we have seen another relatively sharp drop occur from inside the daily supply zone further suggests that we are in the process of seeing the market reverse. If the current drop continues and the market falls down to the point where the buy zone is located, then I think we’ll see a bounce and the market will move back up, possible through the highs of the daily supply zone. If the drop doesn’t continue and we instead see another swing down develop from around the point where the supply zone has formed, then it’s a sign that a much bigger reversal could be forming and we may end up seeing the market drop and fall through the buy zone sometime over the next couple of weeks.

For now I’d suggest you continue watching for entries short inside the supply zone created by the drop. If another swing down is going to develop then it will do so from somewhere around the point where the supply zone has formed so be on the lookout for large bearish engulfing candle if you see the market enter the zone.

AUD/USD – Moving Back Towards Supply Zone

The up-move which was pushing the market towards the supply zone seen in yesterday’s post came to an end last night, but looks to be continuing now after the retracement that caused the up-move to end terminated itself a few hours ago.

Because the up-move terminated reasonably close to the supply zone, it suggests that the banks may have caused it come to an end by getting sell trades placed into the market inline with the point where they have already got some of their sell trades placed. (the swing highs inside the supply zone)  If this is the case then the up-move we’ve seen take place today will likely end somewhere just above the retracement high, as the banks will always look to get their trades placed at prices that are close to where their other trades have been placed.

Tonight I’d watch for signs of a reversal taking place when the market reaches the lower edge of the supply zone. The edge of the supply zone is only 14 pips away from the retracement high we suspect has been created by the bank traders placing sell trades. 14 pips is only a small distance so it’s within reason for the banks to decide to get some additional trades placed this far away from where their others have already been placed.

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