Market Commentary 18/07/16

EUR/USD – Gap Higher After Market Open

After the large drop lower we saw last week it seemed like a continuation lower was likely but upon the market opening last night the price gapped higher and we have seen the price move into the supply zone that formed when the price dropped last friday.

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What we need to see now is if the market can break the low made when the price fell last week. This low has formed either because the banks have taken profits off sell trades placed at the top of the move lower or because the banks have placed buy trades to make the market move back up.

Looking at the market it’s more likely to have been from them taking profits but this cannot be confirmed yet which means we need to watch for a break below the low or a break above the high.  A break above the high would be significant because it’s the last known point where the banks might have placed sell trades into the market, if the price moves above here it would mean the banks either haven’t placed any sell trades at this point or  what trades they did place have now been closed.

This would mean the market is likely to move back up to the highs of the move down as this is a point where we know for sure the banks have placed sell trades.

 

USD/JPY – Price Near To Swing High Of Daily Supply Zone

Today we have seen the market consolidate after making a new high last week, the market is still in close proximity to the high of the supply zone seen on the daily chart, a break above here would signal more upside so we need to monitor the situation closely.

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We can see how the price has spent the majority of today moving sideways, this may be about to change though with the appearance of what looks to be a bullish engulfing candle. This engulfing candle could end up pushing the market up to the important high marked in the image.

This is the high of the supply zone that formed on the daily chart, this supply zone is a point where the banks have placed sell trades in the recent past, if they still have these sell trades placed they will not want the market to break a large distance past the high as it would cause their trades to start losing money.

 

AUD/USD – Consolidation After Gap Higher

AUD/USD also opened with a gap higher and has spent the majority of today consolidating.

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The large drop which took place last friday leads me to believe the market is going to continue dropping in the near future but this cannot be confirmed until the important low marked in the image is broken. This low is the last place where we know the banks placed buy trades, a break through here would tell us the trades which they had placed have been closed and it’s likely for the market to fall even more.

If the price comes back up I would keep an eye on the supply zone found at the top of the move down. If the drop has been caused by the banks placing sell trades they will want to protect their positions in the event of the market moving back up, this means there’s a high chance the market will fall if it comes back to this supply zone.

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