Market Commentary 19/10/16

EUR/USD – Consolidating Inside Daily Buy Zone

EUR/USD is still consolidating inside the daily buy zone it’s been in since last Friday, with USD/JPY spending most of today falling I’m starting to lose confidence that we are going to see EUR/USD move up out of this buy zone.

aviary-photo_131213601575201432The move up which was taking place when I published yesterday’s market commentary did continue, which means we now have three swing lows in the market with a possible fourth being created as we speak. A lot of sell stops still reside around the 1.0950 level so we may see a drop down through this level if a reversal is going to take place. The thing is I’m not so sure we are going to see a the market reverse out of this daily buy zone anymore. The reason why is because USD/JPY has spent most of today falling, it was my belief that when USD/JPY started to fall, EUR/USD would begin to rise out of the daily buy zone, since this hasn’t taken place and USD/JPY is getting close to falling into the 1 hour buy zone where I think the next move higher may begin from, I’m now starting to think that we might see EUR/USD break through the daily buy zone and begin falling to the 1.0600 level.

Although I feel the chances of the market reversing out of the buy zone are now much lower than they were yesterday, it doesn’t automatically mean my outlook is one of more downside. If I saw a large move higher take place out of the zone I would still see that as a signal the market is reversing back to the upside despite and would trade it accordingly despite the fact that as it stands right now, I think the market is going to fall.

 

USD/JPY – Low Broken By Big Move Lower

The low which I marked in yesterday’s market commentary was broken by a large move lower that began around the time the London trading session opened this morning. The fact the low has been broken means the market is likely to continue falling until it has reached the buy zone below the buy zone the market is currently in now.

aviary-photo_131213631462306324As you can see from the image, the market is currently inside the buy zone which caused the last big swing higher to take place. I think the market will end up breaking through this zone either in the next few hours or over the course of tonight and drop into the buy zone found below. Like I said in my EUR/USD analysis, the fact we have seen USD/JPY drop without EUR/USD rising means the chances of EUR/USD moving out of the buy zone are now slim, if USD/JPY reaches the buy zone at the bottom of the image and begins to move up, I think we’ll see EUR/USD break through the daily buy zone and move down towards the other daily buy zone at the 1.06000 level.

As far as entries are concerned, I would watch for an entry short in the supply zone marked on the image. If the market moves up out of the buy zone and into this supply zone, watch for a bearish engulfing candle to form, because I think the supply zone will end up pushing the market down to the lower buy zone seen at the bottom of the image.

 

AUD/USD – Sharp Move Higher Into Daily Sell Zone

In the past couple of hours we have seen the market make a sudden move higher deeper into the daily sell zone it first entered yesterday.

aviary-photo_131213648310582864A move higher didn’t originate from the bullish engulf which formed when I published yesterday’s market commentary, instead the market spent most of the night consolidating with the only real movement taking place over the past couple of hours. I’m not really sure if we’re going to see the market reverse out of this daily sell zone or not, the size of the move into the zone leads me to believe the zone is going to break but on the other hand we have seen three large drops all originate from this zone so that might be a sign the banks have been getting sell trades placed.

I don’t really think there is much to do on AUD/USD at the minute, if the move up continues through the high of the daily sell zone I would say it’s a good idea to look for entries long at the demand zone I’ve marked between the lines, but if we see a large bearish engulf form,  it could signal the beginning of a reversal, which means looking for entries long in the demand zone is a bad idea. Really I think it’s best to just wait until tomorrow to see what price action has formed.

 

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