Market Commentary 19/01/17

EUR/USD – Sharp Drop Into Demand Zone

The drop out of the daily supply zone that began yesterday has continued today, and the market is now inside the demand zone which formed at the bottom of the last swing higher.

The move out of the daily supply zone might be the beginning of a reversal back to the downside, it’s too early to say at the minute whether it is or not, but I think that if this move down continues and breaks through the low of the demand zone it’s inside now, there’s a high chance we are going to see the market move all the way back down to the point where last year’s low formed at 1.03398. If this is the case, it’s likely we’ll see another move higher occur before the reversal gets underway, due to the fact the banks have probably not been able to get all of their sell trades placed into the market.

The supply zone I’ve marked out with the red lines is the point you need to be watching for entries short if the market breaks through the low of the demand zone and then moves back up again. The reason why is because if the banks haven’t been able to get all of their sell trades placed into the market, they’ll make the price rise back up again to the point where their existing sell trades have been placed so they can get more placed around the same area. The supply zone marks the potential area where we could see the banks get more sell trades placed so watch for a large bearish engulfing candle to form if the price rises back into the area tonight or tomorrow.

 

USD/JPY – Reversal Out Of Daily Demand Zone ?

Today we have seen a big move higher take place out of the daily demand zone the market dropped into on Tuesday. The up-move has broken through two supply zones that formed during the move down into the zone but has also created some new demand zones we can use to look for entries into long trades if the market begins to drop.

This big move higher might well be the start of a reversal back to the upside. If it is then the two new demand zones I’ve marked need to be monitored for entries long. The demand zone which I’ve marked with the red lines, is the one which I think the market may return to either tonight or tomorrow but the demand zone seen at the bottom of the image needs to be watched as well as it’s possible we could see a deep pullback take place back into the daily demand zone.

If this occurs then I’d watch for an entry long in the demand zone marked right at the bottom of the image, because this demand marks the point where the bank traders came into the market and got most of their buy trades placed to cause the move out of the daily demand zone to occur. If they cause a deep pullback to take place, they’ll get any additional buy trades placed between the 76.4% and 100% Fibonacci levels so keep an eye out for signs of a reversal taking place if the market comes down and enters this area.

 

AUD/USD – New Higher High

Yesterday we saw what looked to be some profit taking entering the market after the price had broken above the daily supply zone back on Tuesday. This profit taking continue last night with the market falling down towards the demand zone that formed from the move up which broke the daily supply zone. The market reversed before reaching the zone and has managed to make a new higher higher at the beginning of this afternoon.

I’m not sure if this new high is a signal we are going to see more upside take place over the course of tonight, or if it’s a sign we are about to see more profit taking entering the market. In either case I’d still keep an eye out for entries long in the demand zone the market almost entered when it fell last night. This demand zone is the most recent point in the market where the bank traders have got a large number of their buy trades placed.If they still have these buy trades open and want the market to continue moving higher we’ll not see the market break through the zone if it drops back into it.

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