Market Commentary 21/04/17

EUR/USD – Sharp Drop Creates Supply Zone

The up-side momentum we’ve seen over the past few days has not continued today, instead a sharp drop which occurred last night has pushed the market into the demand zone which I said to watch for entries long in yesterday’s post. Unfortunately the demand zone did not cause another swing higher to take place. A small retracement occurred, but later came to an end and caused the market to drop through the zone. This afternoon the market has moved back into the zone, but the current price action is suggesting that another move down is probably going to develop, either later on tonight before the market closes or on Monday when trading resumes again.

The sharp drop which took place last night has caused a supply zone to form. This supply zone is a zone which I suggest you use to watch for entries into short trades. The reason why is because the sharp drop may have been created by the bank traders placing sell trades to make the market reverse. If this is the case we could see the market move back up to the zone so they can more of their trades placed at a similar price, which is what they frequently tend to do during reversal situations.

I don’t think we’ll see the market move into the zone by the time it closes tonight, but it might do on Monday, so be on the lookout for large bearish engulfing candles to form if you see a move into the zone take place.

 

USD/JPY – Retracement Stalls Move Into Supply Zone

After a couple of spikes higher the market did eventually end up moving closer towards the supply zone last night. Today we have seen a slight drop take place, but the way this drop is constructed suggests that it’s been caused by profit taking instead of the bank traders getting short trades placed to make the market reverse.

If the banks were getting sell trades placed to make the market reverse, I’d expect to see the move down be a lot sharper than what it is at the moment, due to the way the banks orders come into the market when getting trades placed. The price action we’ve seen form over the past few hours does suggests that this retracement could be coming to an end, so we may see the market move back up to the highs of the drop by the time it’s come to a close later on tonight.

For now the focus remains on watching for entries short inside the supply zone.

AUD/USD – Consolidating On Edge Of Daily Demand Zone

The retracement out of the daily demand zone which started yesterday has not come to an end, with the market spending most of today consolidating at the edge of the zone.

I think this consolidation will likely now continue until the market closes tonight. I can’t see much point in the banks causing any large movements to take place now, when the market is going to be closing in a few hours time, so we’ll probably see maybe a couple more up and downswings form over the next few hours.

When the market opens on Monday continue watching the demand zone for entries long.

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