EUR/USD – Slight Retracement Back Into Daily Supply Zone
Today we have seen the market retrace back into the daily supply zone the market entered for the first time last Friday. The drop out of the zone we we’re seeing take place when Friday’s market commentary was published did not continue further on into the evening. Instead the price just consolidated between the high and low for the day until the market closed at 10:00pm.
The fact we have seen the market move back into the daily supply zone and subsequently drop back out again suggests that the bank traders may be getting trades placed to make the market reverse, although I do doubt it due to the size of the drops out of the zone we have seen take place so far. As far the current outlook is concerned is think things are still the same as they were last week. I believe that we are going to see a much bigger drop out of this daily supply zone take place but not before the market has moved deeper into the zone and produced some sort of reversal structure i.e up swings and downswing forming at similar prices to one another.
USD/JPY – Small Reaction To Daily Buy Zone
The daily buy zone which I said the market was likely going to drop into in last Friday’s market commentary has finally been reached today. I said the way the market reacts to this buy zone will determine whether we are going to see the market move all the way back up to the daily sell zone which has caused this drop to take place or if we’ll see it continue falling through the buy zone.
Although we have seen a small reaction to this zone occur today, I don’t think it really indicates that the zone is going to fail, due to the fact the reaction itself has been very small, (at least when compared to the significance of the zone), and the market hasn’t dropped deep into the zone yet which I expect it to do before we see meaningful reaction take place. Tonight I think you should watch for a deeper drop into the zone to occur. The small upswing caused by the market hitting the daily buy zone seems to be coming to an end now, so it’s probably won’t be long before we see the market break through today’s lows and move further into the daily buy zone.
AUD/USD – New Higher High
The swing highs we saw forming at similar prices to one another last week have been broken today, by an up-move which began when the market re-opened last night. The fact the swing highs have been broken suggests that we are now going to see more up-movement take place, but it could also be a sign that we’re going to see a new reversal structure start to form inside the daily supply zone.
If we see the market drop from where it is now and move down to the point where the current lows have formed, I think that would be a good signal we are in the process of seeing a reversal structure begin to form in the market. A move back up to the point where the drop originated from should be monitored closely, because if the drop has formed as a result of the bank traders placing trades they are likely to get more placed around the point where they’ve already manged to get some placed which will be the source of the drop.