Market Commentary 22/06/16

EUR/USD – Supply Zone Hit

The supply zone which I marked out in my last post has been hit and we are now starting to see the market’s reaction to it.

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If we continue to see the price drop from this supply zone it might be the first sign we have of the downtrend resuming. For this to be confirmed we’ll need to see the price fall below the current low marked in the image. Until this low is broken there is no way for us to determine if the down-move we are currently seeing is from the banks placing sell trades or from them taking profits off buy positions.

Tomorrow if the market has moved lower with multiple bearish large range candles the drop will create a new supply zone itself which we can use for a potential short entry. A bearish engulfing candle is will be needed in order to take a trade based on this supply zone.

 

USD/JPY – Potential Breakout Forming

Last night we saw the price make a move past the previous highs made on Monday but we didn’t see any candlesticks close past these highs which leads me to believe that what we are seeing is in fact a false breakout.

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The tiny little move up we’re seeing now could be the start of something much bigger, a retracement back up to the 106.000 level is possible. The reason why I believe this is based on two things:

The first is the fact that no serious retracement has taken place for while now, by serious I mean a retracment big enough to be seen on the daily chart. No retracement or consolidation means not many people are losing money, the market can only move in the direction of the trend if a large number of traders are closing their trades at a loss from placing trades during time when the market is consolidating or retracing.

The second is what would have happened when Monday’s high was breached last night.

When this high was broken a significant number of traders will have entered into long trades because they believe the market price was about to increase by a large amount. You can see the bearish pin bar which broke the highs has an extremely large wick on it meaning during the time this pin was forming the market would have looked incredibly bullish causing lots of traders to enter buy trades.

Once the price begins to fall all of these traders close their buy trades at a loss which results in sell orders coming into the market the banks can use to get buy positions placed.

If the banks have placed buy trades which is what is causing the current move higher than the most recent swing low cannot be broken by the market, if it is it means the up-move was caused by profit taking, not by the banks placing buy trades.

 

AUD/USD – New High, Price Now Falling

A couple of hours ago the market shot up past the high made yesterday breaking the area I marked as a point where we cold look for a potential short trade.

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It wasn’t possible to get a sell trade placed upon the market hitting this area because of the fact no bearish engulfing candle formed. I think its likely for the price to drop a little from it’s current location due to the traders who would have got caught in long trades upon the high being broken, if a bigger drop occurs these traders will rush to close out their losing trades so they don’t lose a large amount of money, this will cause further down-movement possibly into the swing low marked in the image.

 

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