Market Commentary 26/01/16

AUD/USD Rebounds Higher

We saw a rebound on AUD/USD today. This move higher could end up materializing into a break above the highs put in place last week.

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We can map the price action of the day by understanding when the different trading sessions begin.

After yesterdays decline the market began recovering at the open of the European trading session. From this the market then proceeded to  move higher with the only pause coming from the U.S traders entering into the market.

The selling we can see now, is most likely from the US traders taking profits off their trades due to the end of the U.S session taking place at 10pm GMT. If we see the price drop to the support level I’ve marked with the blue line, then i think a run for the highs is a likely possibility tomorrow.

 

USD/JPY Bullish Pin Bar At Support

 

After the continuation lower last night, USD/JPY has managed to recover and is currently showing a bullish pin bar setup on the daily chart.

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It remains to be seen whether this pin bar is a high probability setup, we still have a couple of hours left until the market closes, which means there is still a small possibility of sellers coming into the market and pushing the price down, turning the pin bar into more of a doji candlestick than a pin bar.

GBP/USD Profit Taking ?

GBP/USD has been in a steep downtrend since July 2014. The current move down we’re seeing now began back in the middle of December.

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Today’s candle and the four seen immediately before it are the first signs of buying we’ve had since this down-move got underway. This buying is coming from the bank traders taking profits on the sell positions they placed at the top of the current down move.

Put yourself in the bank traders shoes. Had you placed a sell trade at the points marked on the image, by now you would have made a significant amount of profit from your trade and would probably be thinking about taking some of those profits out of the market.

For the bank traders to take profits on their sell positions they need additional traders to come into the market and place sell trades, as taking profits will put buy orders into the market, this what we are seeing occur right now.

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See the bearish pin bar on the image ? This pin is created by retail traders selling, bank traders will not sell when the market has already moved down this far. Anytime you see the market move up or down with no pullback or consolidation taking place in between, do not take any price action signal that may occur. The reason I say this is because consolidations and pullbacks are used to make retail traders lose money. When consolidations/pullbacks end and the market begins moving back in the direction of the trend, all the retail traders who have placed trades during the time the market was pulling back or consolidating begin losing money, which means they end up closing their trades at a loss.  All these traders closing losing trades is what will fuel the next movement in the trend.

When no pullback or consolidation takes place it means at some point there won’t be any traders left losing money, this tells you the movement will be short-lived, so any trading signals you see after a long movement without any kind of pause taking place are likely to result in losing trades as the market is probably about to turn in the other direction.

 

 

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