Market Commentary 25/04/16

EUR/USD – Market Moving Back Above Lows

A new low was made last week but today the market has moved back above these lows and is now near the resistance level which I marked in my last post

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We are seeing a reaction to this resistance right now, but I think another small move higher may take place before the market falls again. There was an opportunity to get long from the demand zone marked in the image, while this demand was small it was still a possible setup as a new high was made immediately after its creation.

I think the market has the potential to move a little higher from its current location, it may be that the banks wish to place more sell trades and are taking profits off their existing sell positions to make the market move higher in order for them to generate enough buy orders from retail traders placing trades to place more of their own sell trades.

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If this is the case then I would watch for the price action around the two upper zones marked above. The banks sold at the swings which these area’s cover but they are likely to have placed bigger sell positions at the top zone than the zone below due to what the retail traders believed about the direction of the market when the price was at these levels.

The lower zone is still a place where an opportunity to short could develop as its unlikely for the market to move all the way back up to the upper zone before going down, if we do see the lower zone get broken, I would take it as a sign of the whole downmove ending but Ideally we need to see how the price action forms when it breaks the zone before coming to this conclusion.

 

USD/JPY – Profit Taking

USD/JPY is currently moving lower due to banks taking profits off buy positions placed before the large move higher occurred.

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The point which needs to be monitored is the demand zone which formed on the move up. Although this demand is a rally-base-rally zone the time at which it formed at is what makes it important in the market. This demand was created by European traders placing buy trades, if you look at the time of when the bearish engulf and the bull candle seen immediately after formed, you’ll see it falls in line with the point when the European trading session was just beginning.

If these traders want to get buy trades placed they need the market to fall, therefore the demand zone is the point where these traders placed their buy trades, if the price returns to this zone it is highly likely we’ll see a reaction as the bank traders will need to keep the price above the zone in order to keep their trades open at a profit.

 

AUD/USD – Market Nearing Daily Demand Zone

 

In last Friday’s post I said how we need to wait for more structure to form before looking for entries long or short as there were not any decent technical levels available in the market which we could use to find trades. Today we have a similar situation, the market has moved lower but there are still no obvious technical levels present which we could possibly use for an entry long or short.

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The small retracement we are seeing now is likely to be the last move up before the market enters the daily demand zone, when it does drop into the zone wait until a clear bullish engulfing candle forms before attempt’s a short trade, by clear I mean significantly larger than the previous candles, if you see a small engulf its unlikely to result in a successful trade as it will not be enough to make a large number of traders close their long trades which will impact how far up the market will be able to move.

 

 

 

 

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