Market Commentary 26/07/16

EUR/USD – Price Falling After Hitting Supply Zone

The supply zone created by the drop seen at the end of last week has caused the price to start falling and it’s looking probable the current low will be broken by the end of the week.

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I said how this zone was important due to the fact it was the last place where the banks placed sell trades into the market, today’s entry and subsequent drop from the zone strongly hints the banks have placed mores sell trades although it’s important to note this cannot be confirmed until the price has broken through the low itself.

It’s possible we may see another move up into the supply zone as the banks might have a few more sell trades left to get placed before the next move down occurs. If this takes place watch for a bearish engulfing candle to form and remember the high of the supply zone can be broken if the banks are getting more sell trades placed just not by a huge amount.

 

USD/JPY – Large Drop Through Current Low

USD/JPY suffered a big drop last night as the market broke down through the low made last Thursday.

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Currently we are seeing some bullish candles enter the market, these are likely to have been caused by the bank traders taking profits off the sell trades placed at the top of this move lower and the highs of the retracement seen before the market broke through the low.

The X’s which I’ve drawn the line from are points where the banks had placed buy trades during the move up. Although I’m pretty sure the market will break these lows there is still a small chance the banks will enter the market and place more buy trades if they have still got buy trades open at the points marked with the X’s. If this is the case the line I’ve marked will not be broken on the next move down and instead we’ll see the price rise back up towards the low which has been broken by today’s drop.

AUD/USD – Big Move Higher

Today we have seen a big move higher take place after the market failed to hit the demand zone where we expected to see buying enter the market.

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You can see there were three main places where the banks placed buy trades to cause this move up. I’ve marked these places with X’s in the image. The X seen closest to the demand zone the market failed to return to is the low which cannot be broken if the market starts to fall, this is where the banks first and biggest buy trade was placed, a break below here would cause them to lose a large amount of money which of course they don’t want to happen.

The supply zone marked in yesterday’s post failed to cause any kind of down-movement, all we got was a small pause which only caused the market to pause for a couple of hours before breaking past it.

For entries long I would watch the demand zone I’ve marked by the two X’s. There is actually two demand zones seen here but I’ve marked them as one purely for the fact that it makes them easier for trading. If the market comes back down into this zone watch for a bullish engulfing candle to form as that will be the signal of the banks coming into the market and placing buy trades to cause the market to move higher again.

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