Market Commentary 24/02/17

EUR/USD – Sharp Drop Creates Sell Zone

The move higher we we’re seeing take place yesterday has continued today, but in the past couple of hours a sharp drop has pushed the market down to the lows made this morning.

The sharp drop began when the market entered a supply zone drawn from a tight range consolidation which took place on Monday. I don’t tend to mark these points as supply zones because there is no way to tell for sure if the sell trades the banks placed to cause the zone to form are still open or not. In this instance it seems like the trades remained open and the banks simply caused the market to move back up to this zone so they could get more sell trades placed into the market.

If this drop continues over the next few hours watch for an entry short in the sell zone. If the market doesn’t move into the sell zone and manages to drop all the way down into the demand zone, you’ll probably see a small reaction or retracement take place. If this occurs continue to look for entries short in the sell zone, because the reaction to the demand zone may just push the market back up into the sell zone and the banks might decide they want to get more sell trades placed.

 

USD/JPY – Buy Zone Broken By Move Lower

Today we have seen the market break through the buy zone which it had fallen back into yesterday afternoon. With the buy zone broken the supply zone I had marked between the black lines in yesterday’s post now becomes valid for trading, and is a zone I think you should begin watching for entries short on Monday.

The drop which caused the buy zone to break has continued, and the market is currently reacting to the demand zone which formed at the beginning of the swing higher. A bullish engulfing candle has formed right at the edge of the zone so this may cause us to see some up-movement take place over the next few hours. Depending on how this up-move develops it could be a sign that we are seeing the bank traders get buy trades placed to make the market reverse. If the up-move is strong and consists of big bullish candles which either cause to the market to break above the supply zone or push it right to the edge, then that to me would be a strong sign the banks have got buy trades placed to make the market reverse.

If the up-move is weak, i.e it contains a mixture of bullish and bearish candles continue to look for trades in the supply zone, as it will be a sign that the banks probably haven’t got buy trades placed to make the market reverse.

 

AUD/USD – Big Drop Creates Supply Zone

In yesterday’s market commentary we saw how the market had moved up and broken through the supply zone which had formed from the drop we assumed had taken place as a result of the banks causing a false breakout. Today the market has dropped again in what could either be another false breakout or simply a retracement caused as a result of the banks wanting to get more buy trades placed into the market.

The market is currently inside the buy zone created by the up-move which broke the supply zone seen in yesterdays post. If today’s drop has been caused by the bank traders wanting to get more buy trades placed we’ll not see the market break a large distance beyond this buy zone, as this zone is drawn from the most recent point where they could have potentially got a large number of their buy trades placed. If you see a strong move out of this zone begin later on tonight, it could be the beginning of the move which causes the market to break above the supply zone created by today’s drop.

If the market falls through the buy zone and you actually see multiple candlestick close below the buy zone low, then it’s a signal the banks have caused today’s drop to take place by placing sell trades into the market and you should begin looking for entries short in the supply zone seen at the top of the image.

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