Market Commentary 26/04/17

EUR/USD – Daily Supply Zone Broken

The daily supply zone which the market had been inside since the large gap higher took place on Monday was broken shortly after yesterday’s market commentary was published. The market has since dropped back into the zone, but the size of the drop coupled with the price action we are currently seeing form is suggesting that another move higher may take place sometime tonight or tomorrow.

If another move higher is going to take place I think we could see it begin when the market drops into the zone I’ve marked in the image. This zone isn’t one which I consider to be a demand zone, but it is one that’s formed due to the bank traders placing buy trades, albeit small ones when compared to the demand zone seen below. If you see the market drop into the zone later on tonight watch for signs of a reversal taking place before going long. Ideally you want to see a bullish engulfing candle which is much bigger than the surrounding candles and the candle it engulfs form, but a sharp move out of the zone can also be used as an entry signal if no engulfs form.

 

USD/JPY – Moving Deeper Into Daily Supply Zone

Late last night we saw the market move up into the daily supply zone it had been heading towards throughout yesterday. Today the market has continued moving deeper into the zone, and is currently reacting to the 111.500 round number level I said to watch for signs of a reversal taking place in yesterday’s post.

So far we haven’t actually had any signals a reversal is taking place. A bearish pin bar with a relatively large wick formed a couple of hours ago, but we have yet to see any down-movement take place as a result of its formation. If this pin bar has formed from the bank traders getting sell trades placed, we could see the first swing down in a reversal pattern form over the next few hours. The swing down could be a sign a reversal out of the daily supply zone is in the process of forming, but it would not be enough to confirm that it is actually going to take place, so watching for additional swings to begin around the point where the swing high of the swing down formed would then be the next objective.

For I suggest you just watch for a swing down to take place somewhere inside the daily supply zone,.

 

AUD/USD – Large Drop Breaks Demand Zone

As expected the little retracement we were seeing take place when yesterday’s market commentary was published came to an end last night, but not before a spike into the supply zone which I’d marked with a question mark had occurred. This supply zone was not valid for trading, at least not for me, but did cause a large down-move to begin after it had been spiked. That down-move has continued today, with the market managing to not only break through the daily demand zone which had caused the retracement to occur, but also the other demand zone that had formed below.

With both demand zones now broken, it seems probable we are going to see the market continue to drop over the coming days and weeks. I’m hesitant to say for sure though that this will be case right now, due to the fact that we could still see another swing low form over the next few hours. If another low forms it will still be in range of the other lows (marked with X’s), which means it’s possible this whole move down has simply been created by the bank traders as a means to get more buy trades placed into the market to cause a huge reversal to occur.

I personally don’t think this going to be the case, but it’s something which still needs to be taken into account due to the impact it could have upon the market. As far as entries are concerned, the supply zone which caused the drop to begin yesterday is a point where you should look for entries short if the market starts to move back up. I don’t think we’ll see that happen tonight or tomorrow, so for the moment continue to monitor the price action.

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