Market Commentary 22/03/17

EUR/USD – Moving Towards Highs Of Daily Supply Zone

Yesterday’s large move higher which almost caused the market to break through the daily supply zone did not continue last night. Instead the market spent most of the night consolidating until a drop took place at the open of the London trading session this morning. The drop caused the market to run into a number of sell stops which had accumulated around the 1.07800 level (check Oanda’s order book to see the stops). Once these stops had been hit the market started to move back up again, and is currently close to breaking above the highs made yesterday.

As you can see this past hour we have actually seen the market break above yesterday’s highs. I wouldn’t really consider this to be a confirmed break just yet, as the market hasn’t really closed above the highs, but I think that we’ll probably see more candlesticks form above the highs in the coming hours. The fact that no sharp down-move has take place inside the daily supply zone suggests that we are going to see the zone broken and the market continue moving higher. There is still a chance a sharp drop could take place tonight, but I doubt it with the current price action we are seeing form.

As far as entries are concerned I think it’s best to wait to see whether the daily supply zone breaks or not before going long or short. If it breaks then we can mark a demand zone around the source of the up-move we’ve seen today, as that will then be confirmed as the most recent point where the bank traders have got buy trades placed. If the zone doesn’t break, I think it’s still not worth going short until some more signs of the bank traders getting sell trades placed have appeared in the market.

 

USD/JPY – Daily Buy Zone Broken

The daily buy zone the market dropped into yesterday has been broken today, but a retracement back into the zone looks to be developing based on the price action we’ve seen form over the past couple of hours.

You can see that a bullish pin bar formed a couple of hours ago and a bullish large range candle looks to be forming this hour. I think if the large range candle remains rather bullish and closes near its highs, there’s a good chance we could see the market retrace back into the daily buy zone tonight. I’m not exactly sure how big this retracement could be or where it might terminate, but I don’t think it will reach the highs of the current swing lower which caused the market to fall into the buy zone.

For now just monitor the market to see what it does over the course of tonight. I can’t recommend going short because I don’t really know where the retracement will end, and going long is out of the question due to the buy zone being broken, so it’s best if you just monitor the price action for now.

 

AUD/USD – Large Drop Confirms Supply Zone

Yesterday we saw the market begin to sharply drop down towards the lows of the daily supply zone the market had been in since the end of last week. I said how if the drop continues and causes the market to move all the way down to where the current lows had formed, it would be a good signal the banks are getting sell trades placed to cause the market to reverse. Well last night the drop did continue and was actually able to cause the market to break through the current lows.

The fact the market dropped such a large distance means that there is a chance the bank traders are getting sell trades placed to cause the market to reverse. If they are we’ll see more swings develop inside the daily supply zone in the coming days leading into next week. The supply zone drawn inside the zone is now a point where you want to watch for entries into short trades, because if more swings do form, it’s likely their highs will terminate in the region where the high of the supply zone has formed, as the banks always try to get their trades placed at similar prices to one another before causing reversals to occur.

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