Market Commentary 25/11/16

EUR/USD – Inside 1 Hour Supply Zone

The move up from the lows which began yesterday has continued today, with the market now inside the 1 hour supply zone that formed back on Tuesday.

aviary-photo_131245598574441444Even though the market has still not broken through the high of the supply zone I still think we are seeing the beginning stages of a reversal take place. You can see the market returned to the demand zone which formed from yesterday’s move higher late last night, you couldn’t have really traded this demand zone due to the fact there wasn’t enough evidence there to suggest the market was going to move up to the supply zone. I said in yesterday’s post how we really need to see a break through the high of the supply zone before we can say a reversal is taking place, even though the market has still not broken through the high I do think what we are seeing now is the beginning stages of a reversal back to the upside.

Next week the focus is on the demand zone seen at the bottom of the image. If the move up from the current low has been created by the bank traders placing buy trades, they’ll have probably not been able to get all of these buy trades placed due to a lack of sell orders coming into the market. This means they’re going to have to make the market fall again in order to get people to sell so they can place the remainder of their buy trades. When it falls they’ll need to make the market look like it’s going to continue falling as that’s the best way to lure lots of traders into placing sell trades, the point where the market will look its most bearish is when it’s inside the demand zone so be on the lookout for signs of a reversal when the market enters the zone.

USD/JPY – Small Drop After New High

USD/JPY has dropped again today after making a new higher high last night, the market is now moving back towards today’s high but I don’t think it’ll be long now before we see the market reverse and move back out of the daily sell zone.

aviary-photo_131245615442591104Today’s drop gives us more evidence the market is reversing due to the fact we know when a reversal is taking place multiple swings will form in the opposite direction to which the market is reversing. The reason multiple swings form is because the bank traders don’t have enough orders available to get all of their trades placed into the market at one price, they have to drive the price up and down in order to generate enough orders for them to actually get all of their trades placed. The drop we have seen today might be the first of these multiple swings seen before the market reverses. If it is then expect the second swing to form somewhere around the green area I’ve marked in the image.

When multiple swings form due to the banks getting their trades placed,  the swings will all tend to form at similar prices to one another. This means any additional downswings we see form from now on will form around the same price as where the high of the swing down seen today has formed. On Monday I would watch for the second swing down to form somewhere inside the area I’ve marked in the image. This area isn’t a supply zone so to speak, but it does encompass the supply zone that’s formed due to today’s drop. I think we’ll see the market reverse somewhere in this area so watch for a large bearish engulfing candle to form when the market enters the zone. If you decide to go short make sure you put your stop above the high of the sell zone and not the high of the zone I’ve marked, because if another swing ends up forming, it might break through the high before reversing so to be on the safe side put your stop above the high of the sell zone.

AUD/USD – Falling From Supply Zone

AUD/USD is currently falling after hitting the 1 hour supply zone that formed at the end of last week.

aviary-photo_131245651728157700I think we’ll see this down-move continue until it’s reached the new demand zone that’s formed from today’s move higher. This demand is the new point you want to be watching for entries into long trades, the demand zone seen at the bottom of the image is still valid for trading, I just don’t think we are going to see the market fall that far down before reversing. On Monday watch for bullish engulfing candles to form in the demand zone closest to the current market price.

It’s my belief the up-move which has created this demand has formed due to the bank traders placing buy trades to make the market reverse, if they have any other buy trades left to place they’ll place them close to where these buy trades have been placed which is the demand zone closest to the current market price.

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