Market Commentary 25/01/17

EUR/USD – Consolidating Inside Daily Supply Zone

The second push into the daily supply zone we were seeing take place when yesterday’s market commentary was published did not continue last night. Instead the market fell back down to the low made on Monday and has been consolidating between this low and yesterday’s high ever since.

The demand zone I marked in yesterday’s post did cause a small up-move to take place, but this was not a zone you could have traded due to it being found inside a daily supply zone. I do think we’re going to see a reversal out of this daily supply zone occur, but I need to see a sharp move down below the lows take place before attempting to go short, as a break will confirm to some extent the bank traders have got sell trades placed at the swing highs of the consolidation.

 

USD/JPY – Reversal In Progress ?

The move out of the demand zone that was taking place yesterday has continued today, and there is now more evidence to suggest that we actually be seeing a deep pullback reversal take place in the market.

The move out of the demand zone did not cause the market to break above the red line I marked in the image, which meant a move back down to the lows was still likely to take place. We have seen a move down occur, but it failed to push the market below the lows of the swing higher, which suggests the banks have got more buy trades placed into the market. The fact the low of this move down terminated close to a swing low which formed during the swing higher, is also a good sign the banks have got buy more trades placed, because we know that they like to get their trades placed close together when causing reversals to occur in the market.

Tonight I think it’s a good idea to watch for an entry long in the demand zone I’ve drawn from the two lows marked with X’s. If the banks have got buy trades placed here they could make the market fall back to get more placed so watch for large bullish engulfing candles to appear once the market enters the zone.

 

AUJD/USD – Sharp Drop Creates Supply Zone

After making a new higher high again yesterday morning it seemed like the market was going to make another one today, but this was not to be because a sharp drop took place just after midnight and pushed the market below the lows I’d marked with a red line in yesterday’s market commentary. The fact the market has broken through these lows is a sign we might be seeing a reversal take place, as all swing highs made so far including the ones made today have been reasonably close together in the prices they’ve formed at, whereas the swing lows are kind of all over the place which suggests they have formed due to the bank traders taking profits off their trades.

The most important point in the market now is the supply zone that’s been created by the sharp drop. If the swing highs and the sharp drop have been created by the bank traders placing sell trades to make the market reverse, we’ll not see the market break a large distance above the highs of the supply zone as that would be a signal that the highs have actually formed as a result of profit taking, due to the fact we know the banks like to get their trades placed as close to one another as possible when causing a reversal to take place in the market.

For now I’d keep an eye out for signs of a reversal taking place if the market re-enters the supply zone later on tonight or during tomorrow.

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