Market Commentary 21/02/17

EUR/USD – Sharp Drop Out Of Consolidation

The consolidation which took place for most of yesterday was broken today by a sharp drop which occurred in the early hours of this morning. The drop has caused the market to fall back to the current low which was created by the swing higher we saw take place last week. If the market stays as it is now close to this current low it will be a signal the market has reversed and we are going to see more downside occur over the coming weeks.

At the moment it’s to early to say whether this downmove is a continuation of the downtrend because the drop back to the current lows could just be a deep pullback created by the banks to get more buy trades placed into the market. If this is the case then we won’t see the market break a large distance below the current low over the coming days. If the market does break the low then it’ll be a sign the downtrend has resumed and we are likely to see much more down movement take place in the next few weeks.

For now I recommend you keep an eye of the supply zone I’ve drawn from the high of the current swing lower. This is the most recent point where the banks have been suspected to get a large number of sell trades placed, so monitoring the price action if the market returns to this point is important for determining which direction the market is going to move in.

 

USD/JPY – Moving Towards Daily Demand Zone High

Because USD/JPY and EUR/USD have an inverse correlation with one another it means when EUR/USD rises or falls USD/JPY does the opposite and vice versa. So because a sharp drop took place today on EUR/USD, it meant that a move higher occurred on USD/JPY, although this move higher was not as sharp as the move lower we saw on EUR/USD.

The move higher has pushed the market back above the buy zone that formed last week and closer to the highs of the daily demand zone the market has been in and out of for the past few weeks. I’ve redrawn the buy zone to incorporate the swing low made yesterday because the swing low may have formed as a result of the bank traders placing buy trades into the market. We don’t know if it has yet so don’t look for any long trades in the buy zone, but if the market continues moving up from where it is now and breaks above the high made when the market spiked the sell zone, this buy zone will become valid for trading so keep that in mind if you see a move higher take place tonight.

 

AUD/USD – Current Low Broken

The retracement that was taking place yesterday terminated late last night and the market has now fallen down to the current low I marked in yesterday’s post.

You can see the market has actually spiked through this low today but no follow through has taken place which suggests another move higher is going to occur later on tonight. For entries I still think you should keep an eye on the supply zone seen inside the daily supply zone. If a move higher does take place then a move into this supply zone is likely and if the bank traders have actually caused this supply zone to form by placing sell trades they’ll not let the market move a large distance past it’s high, so keep an eye out for bearish engulfing candles if the market enters the zone.

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