Market Commentary 18/05/16

EUR/USD – Market Has Moved Lower After Hitting Supply Zone

The supply zone which the market first came into contact with yesterday has pushed the price down to new lows.

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The price is now in the area where the last up-swing on the daily chart took place. A bigger retracement higher is now possible if the market drops deeper into the zone but we must see further price action to confirm this. We are have seen some buying enter the market over the past few hours which is likely to be from bank traders taking profits off sell trades. If this buying continues there exists the potential for today’s daily candle to become a bullish pin bar.

The pin may signal the beginning of the retracement so it could be a good long trade which may offer a few pips. Tomorrow watch for a drop deeper into the origin zone, if a large bullish engulfing candle forms it will be the first sign we have of banks taking a larger amount of profits off their sell trades and we’ll need to watch the resulting price action closely to get an entry long.

 

USD/JPY – New Higher High

After yesterdays stop run it looked possible for the market to finally break the consolidation and start moving lower.

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Whilst we did get a new lower low we didn’t see a continuation lower, this was because of the sell stops which had accumulated around the 108.650 – 108.800 levels.


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You can see the spike in sell orders on the open orders graph, if you go onto Oanda and look at the graph you can see the sell stops vanished from the graph on the next candle. This means they were consumed and must have been the cause for the market moving higher for the rest of the day.

The demand zone marked on the 1 hour chart is a place where we can look for an opportunity to get long in the market provided we see a bullish engulfing form when the price revisits the zone.

 

AUD/USD – Demand Zone Failed

The demand zone identified in my last post didn’t cause the market to move higher upon its return, instead it broke the zone and has moved lower for the majority of last night and today.

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Although the market has fallen it has not manged to break past the swing low which we saw at the beginning of the up-move. This may be a sign of bank traders placing buy trades to push the market higher, if you look at today’s daily candle you’ll see it currently has a wick on it, if the market continues to advance higher it might push the price up enough so that the candle becomes a bullish pin bar.

If this turns out to be the case then we could see further up-movement tomorrow and Friday, it would also mean the demand zone marked in the image becomes valid for looking for long trades, but as always we need to see a bullish engulfing in order for us to get an entry.

 

 


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XM offers spreads as low as 0 pips, Negative Balance Protection, CFDs on Forex, Stocks, Indices, Gold & Oil.

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