Market Commentary 16/03/17

EUR/USD – FOMC Causes Large Move Higher

In yesterday’s post I said how it was likely that we may soon see the market reverse out of the retracement it has been in since the end of last week, due to the fact the market was unable to break through the low which had been made around midnight on the 14th March. It turns out that the retracement would end sooner than I anticipated, as last night the FOMC news was released and this caused a large up-move to occur which has pushed the market towards the daily supply zone that formed at the end of January.

I can’t decide yet if this daily supply zone is likely to cause the market to reverse or not, but I definitely think we’ll see some kind of a retracement take place once the market moves a little deeper into the zone. The up-move from the FOMC would have caused the buy trades placed by the banks to go into a large amount of profit, so it’s only right they’ll want to take some of this profit off their trades in order to secure some of it for themselves or get more buy trades placed at a later date. As far as trades are concerned the only level I suggest you watch at the moment is the demand zone created by the FOMC up-move.

This demand is now the most recent point where the bank traders have got buy trades placed. If they have not been able to get all of their buy trades executed we could see another move down into this demand take place, so be on the lookout for bullish engulfing candles if you see the market fall into the zone tonight and next week.

 

USD/JPY – Drop Through Buy Zone Suggests Deeper Reversal

Whilst the FOMC caused a large move higher to take place on EUR/USD, on USD/JPY a large drop occurred, and this drop has caused the market to fall below the buy zone which caused the up-swing into the daily supply zone to take place originally. The fact the buy zone has been broken is a sign that we are now likely to see the market drop into the daily buy zone seen between the 111.573 – 112.400 levels.

This buy zone and the daily supply zone the market has just dropped out of seem to be acting as the upper and lower boundary’s of a multi-day consolidation the market has been in since the beginning of January. Whether or not this consolidation is taking place because the bank traders are getting buy trades placed to cause another large up-swing to occur, or because they are getting sell trades placed to make the market reverse remains to be seen, but I think that for the moment the best approach is to look for an entry long inside the daily buy zone, because even if the market is reversing it’s likely we’ll see some kind of reaction occur once the marked drops into the zone.

 

AUD/USD – Sharp Move Higher Breaks Supply Zone

The release of the FOMC also had a dramatic effect on the price of AUD/USD, with a sharp move higher taking place right after the release came out. The move higher has caused the market to move back into the daily supply zone which has been causing the market to drop since the middle of February. Currently we are seeing the price fall out of this supply zone once again, but I think that this is more likely to be because the bank traders are taking profits off their trades, than it is them placing more sell trades to make the market reverse.

If the drop becomes bigger and causes the market to fall down to the point where the high of the broken supply zone sits, then I think it could be a sign that we may be seeing the market reverse, and you should begin watching for signs that the bank traders are getting more sell trades placed into the market. i.e multiple swings taking place with the highs forming close to one another. As it stands there isn’t much I recommend you do at the moment apart from watch the price action to see if a bigger drop takes place. You can watch the demand zone at the bottom of the image for an entry long, but I doubt we’ll see the market drop into this zone by the time the market closes tomorrow night.

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