Market Commentary 21/07/16

EUR/USD – Sudden Up-Move Countered By Large Bearish Engulfing Candle

This afternoon we saw the price of EUR/USD increase rapidly before falling with the appearance of a large bearish engulfing candle.

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It’s my belief the bearish engulf that we seen an hour ago was caused by the bank traders placing sell trades in anticipation on another move lower. If you look at where the high of the bullish candle which gets engulfed is you’ll see it’s quite close to where the banks placed some of their previous sell trades.

If you have read my some of my books you’ll know the banks like to get their trades placed at similar prices in the early stages of a reversal taking place. I suspect this is what we are seeing here although I cannot be sure until the current low has been broken which I think will occur quite soon.

As far as opportunities to get short is concerned I would market the current low as a breakout zone if the price breaks through it. There are probably a large number of traders  who are watching the market right now anticipating a breakout to take place. These traders are going to have their pending orders placed at the low so when the market breaks it their sell trades are instantly executed.

A retest back up to the low might take place in order to make the breakout traders close their trades and put buy orders into the market which the banks will use to get more sell trades placed.

 

USD/JPY – Supply Zone High Broken, Big Move Lower

The high of the daily supply zone which the market has been approaching for the past few days has now been broken and we have seen a dramatic drop take place which may be the start of a reversal.

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You can see how a supply zone formed when the price dropped, I’ve marked this supply zone to incorporate the swing high of the drop down as this is the point where the banks will have placed the majority of their sell trades which caused the price to fall.

At the moment it’s not clear if the drop has been caused by the banks taking profits of buy trades placed earlier on in this move up or if it has been caused by the bank traders placing sell trades to make the market reverse. For now we need to watch the supply zone at the top for the move down because if the market comes back here the banks might place more sell trades using the buy orders that would have been generated from the move up into the zone.

 

AUD/USD – Possible Consolidation Forming

AUD/USD has not managed to break below the low made yesterday nor has it been able to break the high of the last move down although it is quite close to it.

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The supply zone seen just above the current market price is still our main focus as the banks might want to get more sell trades placed around this point which means they may make the price make a sharp move higher in order to generate buy orders that they can use to place sell trades.

Of course wait for a bearish engulfing candle before going short when the market enters the area and make sure the engulf is noticeably bigger than the candle it engulfs.

 

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