Market Commentary 22/04/16

EUR/USD – Continued Decline, Lows In Danger Of Being Broken

EUR/USD has continued to fall after the stop run we saw yesterday, the lows of the pullback which can be seen on the daily chart are now in danger of being broken by the market either today or at the beginning of next week.

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A small retracement higher started last night, this ended when the European trading session began this morning, the market has continued to fall since then with a small one candle pause taking place when the US session started. We may see the market break the low of the pullback by the end of today or we might see it when trading reopens on Sunday night.

When the break takes place the market might make a run higher into the resistance level I’ve marked above, if a bearish engulf forms at the level it might signal the start on a new move lower.

 

USD/JPY – Big Move Higher

 

Today we have seen a huge move higher on USD/JPY, I initially thought this may have been caused by a news event but looking at forex factory it seems no USD has been released.

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The first move higher in the up-move took place at the European open, this tells me bank traders in London – Germany – France etc placed buy trades are the ones who were behind the move. Usually when the market makes a one directional move at the beginning of the day there is typically a small pause or retracement just before the US session to give bank traders in the US enough orders to get their own trades placed in the direction of the morning movement.

We haven’t seen this happen today which means the US traders must have placed their long trades at the end of yesterday’s US session, I’ve marked the points where they must have been buying on the chart with a green box. You can see how over the course of the night the market was not able to fall far below the lows where the US traders were buying, this is because if a drop was to occur which pushed market below were these traders had their trades placed it would mean they would lose money and be forced to liquidate.

On Monday watch for a small shallow pullback to take place, its likely the banks will want to take some profits off their buy positions soon which will cause a small drop, the drop may create some levels for us to use to get an entry into a long position.

 

AUD/USD –  No Retest At Breakout Zone

 

The market did not end up retesting the breakout zone I had marked in yesterday’s post, there was a retracement higher but it terminated at a supply zone which formed at the end of the down-move.

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I don’t really like trading zones and levels which form at the end of down-moves, In my experience I’ve found they tend to have a low success rate also this is a drop-base-drop zone which if you have read my article will know has a low probability of working out successfully due to it being created by banks taking profits as opposed to placing trades.

The market is now on its way into the daily demand zone which formed at the bottom of the last swing higher, a move higher may develop from this zone but I don’t think it will be enough to push the market above the swing high at the top of this move down.

On Monday you need to wait to see if the market moves lower from its current price, at the moment I can’t see any decent levels we can use to get a possible entry short so we must wait to see what new structure forms.

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