Market Commentary 16/08/16

EUR/USD – High Broken By Big Move Higher

The current high which the market made back on friday has been broken today by a large move higher.

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Right now we are seeing some selling enter the market because of the bank traders taking profits off their buy trades. They were able to take profits due to the USD news which came out a couple of hours ago. If you look at the candle for the hour which the news came out you can see it spiked higher to new highs before falling lower and eventually closing bearish. The spike would have made a large number of traders enter buy trades because they felt like the market was getting ready to take off, this was helped by the fact the market had already made a big move higher over the course of the morning.

The traders would have thought the news was causing a continuation of the mornings up-movement, by getting into the market they unassumingly gave the bank traders who caused the movement the opportunity to take profits off their buy trades.

I’m not sure when this profit taking will end but I would expect the down-move to terminate around the point where the current high is located. This is because by the time the market has reached this point most of the retail traders who went long during the move up this morning will have closed their trades at a loss and there will be an abundance of sell orders in the market for the bank traders to use to get more buy trades placed.

 

USD/JPY – Demand Zone Broken Price Now Retracing

The demand zone which the market came close to entering yesterday has been broken by a move lower which originated from the supply zone marked in my last post.

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The market first entered the zone early last night but it wasn’t until gone midnight that the market began to move out of the zone with the appearance of a bearish engulfing candle. The bearish engulf caused the price to fall through the lows created by the retracements and then through the demand zone which formed as a result of the banks potentially placing buy trades into the market.

The buying which we have seen enter the market over the past couple of hours is probably profit taking by the bank traders although it’s possible it has been caused by the banks getting buy trades placed into the market because of the fact the current low is still not that far away from the low of the demand zone which we suspected had been created due to the banks placing buy trades. If the market goes on to break through the low of this current retracement higher it’s likely it will continue to fall down to the low of the down-move caused by Britain’s exit of the EU.

 

AUD/USD – Sharp Drop From Sell Zone

Similar to EUR/USD, AUD/USD also spent most of this morning moving higher but started to fall when it reached the second sell zone I marked in yesterday’s post.

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When the market entered the first sell zone a bearish pin bar formed, I think this pin was created by the intra-day bank traders who had placed buy trades to make money from the move up, hence the reason why the market didn’t reverse when the pin closed.

Once the market entered the second sell zone the USD news was released and the price began to fall. I’ve redrawn the buy zone to incorporate the move up which began yesterday, what we need to do now is watch to see if the market begins moving higher back towards to the high of today’s drop or if the price begins to drop lower through the buy zone where we know the banks might have placed buy trades.

 

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