Market Commentary 20/10/16

EUR/USD – Falling After Large Spike Out Of Daily Buy Zone

EUR/USD is in the process of falling deeper into the daily buy zone after initially spiking higher due to the ECB press conference which took place just over an hour ago.

aviary-photo_131214480906981167The spike pretty much confirms the market is now going to fall through the daily buy zone it’s currently in to the other daily buy zone found below. You can see how the spike caused by the ECB conference almost hit the sell zone I had marked last week, the fact the market reversed so close to this sell zone, means it’s really likely the banks have got a large number of their sell trades placed around here. I think if the market falls through this buy zone and drops into the one below, we’ll see a retracement develop that will terminate somewhere between the spike we’ve seen today and the sell zone it almost entered.

The sell stops which had been building up around the 1.0950 level were hit when the price fell after the spike, it’s likely a lot of the down-movement we have seen over the past couple of hours been caused by these sell stops being executed. As far entries are concerned I would watch for an entry short in the supply zone I’ve marked out with the black lines. Although this is a big zone it has a high probability of causing a reversal due to the fact it was created by the banks placing a large number of sell trades into the market, if you see a bearish engulf form in the zone, it’s likely to be because the banks are getting more of their sell trades placed which means the market is probably about to fall.

 

USD/JPY – Supply Zone Broken By Move Higher

The supply zone which I said to watch for an entry short in the event of the market moving out of the buy zone, has been broken today by a move higher caused by the Philly Fed Manufacturing News coming out as being better than expected for USD.

aviary-photo_131214488018498364It would have been possible to trade the move up out of the buy zone had you entered long when the bullish engulfing candle marked with an arrow formed, but to be honest it’s not a trade I would have taken due to the fact I thought we were going see another move down take place before the move up out of the zone began. When the market started to move out of the supply zone it didn’t move out of it in a strong way, the bearish candles were quite small and there was still a little bit of buying taking place which kind of suggested a break through the zone was inevitable.

I think today’s up-move is going to push the market through the sell zone seen at the top of the image towards the daily supply zone found between the 106.100 level and the 107.500 level. When the market reaches this daily supply, it’s my belief we’ll see a large move down take place back to the daily demand zone that will form as a result of the market moving past the sell zone seen in the image above.

When this daily demand zone is reached, I think it will signal the beginning of a major swing higher that will end up terminating around the 113.000 level, or it will signal a resumption of the previous up-trend the market was in from September 2012 to August 2015.

With the move up we have seen today, I think the focus now is on getting long trades placed to take advantage of the move through the sell zone. So far there hasn’t been any places we can look for entries long, but I think some kind of small down-move will take place when the market enters the sell zone so hopefully that will give us some market structure we can use to get a long trade placed.

 

AUD/USD – Large Drop Out Of Daily Sell Zone

Today we’ve seen the market fall out of the daily sell zone it entered back on Tuesday.

aviary-photo_131214552111036833Yesterday’s sharp move into the zone made it seem like the market was going to continue moving higher, but just after midnight a large bearish engulfing candle formed and caused the market to begin falling. The fall ended up breaking through the demand zone where I said to watch for an entry long if the move up continued. I think we’ll see the market continue to fall from here possibly down to the daily demand zone marked at the bottom of the image.

This daily demand zone formed from the banks either placing buy trades because they want the market to move up, or from them taking profits off sell trades placed inside the daily sell zone, I’m pretty sure it’s from them taking profits off sell trades but I still think a small move higher will be generated when the market enters the zone, so be aware of that if you decide to place any sell trades when the market is close to entering the zone.

For entries short, I would keep an eye on the supply zone created by the drop last night. If the bank traders have not been able to get all of their sell trades placed into the market, they’ll make the price move up again to generate buy orders they can sell into, this move up will probably terminate inside the supply zone as the banks try to get all of their sell trades placed at prices close to one another, so be on the lookout for a bearish engulf if the market enters the zone.

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