Market Commentary 23/05/16

EUR/USD – Sell Stops Building Below The Current Low

Last Fridays retracement has caused a large number of traders to enter long positions. The sell stops of these traders have built up below the current low in the market.

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On the open orders graph you can see how there is a high concentration of sell stops right below the current market price. A potential scenario which could be building up is a larger retracement against the trend. The small retracement we saw last week may have been caused by bank traders taking profits off sell positions placed earlier in the downmove. If they did not have enough sell orders available to take all of the profits they wanted then a run into the sell stops will provide them with the opportunity to take the remaining amount of profits off their trades.

If this turns out to be the case it should result in another move higher which is likely to break above the current high in the market.

Tonight and tomorrow should be spent watching to see how the market falls into these sell stops. We have the Economic sentiment news coming out early in the morning which could make the price drop into the stops upon its release.

 

USD/JPY – Bearish Pin Bar After Move Lower

USD/JPY has continued to decline after the drop which occurred a few hours before the market closed last week.

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The drop which took place right after the market opened last night caused a retracement to form which ended with a bearish pin bar being created. Some people probably wouldn’t consider the pin in the image to be a bearish pin due to the body of the candle closing further past the previous candle but really that only makes it stronger because not only is the candle a bearish pin bar it’s also a bearish engulfing candle.

There is also a collection of sell stops building up just below the current price.

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These stops have built up because of the price failing to move lower over the past 6 hours. Reversal traders have entered buy trades as they think the market is going to move higher. The current swing low is the nearest place for these trader to put their stop-loss, a run into these stops may cause the retracement we’re in to end or it could signal a stop cascade to take place and push the price lower.

For now watch how the price action develops over the next few hours, we may see a small move higher to lure more reversal traders into placing buy trades and in turn put more stops into the market which the banks might use to place more buy trades.

AUD/USD – Supply Zone Formed On The 1 Hour Chart

When the market opened last night the price rose past the high which was made last Friday, a downmove followed which has created a supply zone on the 1 hour chart.

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Some supply and demand traders will have marked the supply zone above as two separate zones but I feel it’s easier and more profitable if you mark zones close together as one zone. If you trade each individual zone then you have to pay the spread twice which over time will make an impact on your profits.

Tomorrow we need to watch in case the low of this retracement gets broken by the market, if the price manages to close beyond the lows it’s a signal the price is likely to move lower, if the low ends up being penetrated but the price fails to close below then it could be a sign of a base forming and a larger retracement taking place.

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2 comments

  1. Mike R - USA

    Outstanding daily commentary. I recently stumbled across your website and blog. It is a must read for me every single day. I’ve printed out every lesson you’ve provided and studied them word by word. Thanks so much for volunteering all of this info. Please keep up the great work. We all know you don’t have to do this.

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