Market Commentary 26/08/16

EUR/USD – Yellen Speech Causes Large Swings

A a couple of hours ago Janet Yellen gave a speech regarding the Federal Reserves Monetary Policy Toolkit and as you’ve probably already noticed it has caused significant volatility in the markets.

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Before the speech was given the market had risen back up into the sell zone which the market had entered yesterday. I thought this zone was going to cause the market to reverse and when the news came out it seemed like I was right because the price instantly fell a large distance lower. We then saw the price begin to rise back up, at the time I simply dismissed this as being caused by the banks taking some profits off their sell trades, when the market started to move back above the open of the candle I thought that maybe the analysis had been all wrong and instead of the banks getting sell trades placed these past few days they were actually getting buy trades placed in anticipation of another move higher.

The market eventually rose into the supply zone you can see on the image. This supply zone was the last point in the market where the banks got a large number of sell trades placed if they wanted these sell trades to stay open they would have to come into the market and place more sell trades in an effort to keep the market from breaking through the high. It didn’t take long before the price started to fall out of the supply zone and back towards the open of the candle. Now the price has fallen such a large distance it seems incredibly likely we’ll continue to see the market fall over the coming weeks so the focus is on getting short trades placed to make money from what is undoubtably going to be a large swing lower.

USD/JPY – Moving Higher After Spike Into Buy Zone

The Yellen speech caused USD/JPY to fall into the buy zone which I marked in yesterday’s post.

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As you can see the market actually moved higher when the speech was taking place but by the time the hour had come to a close the resulting candlestick was a bearish pin bar. Since then the price has made a sharp move higher through the sell zone which formed back on the 18th, I think this is definitely the beginning of the larger retracement I’ve been talking about in my last few posts. The focus for next week is on getting long trades placed to take advantage of this retracement, as it stands there isn’t any technical levels which stand out to me that we could possibly use to look for entries long so it’s best waiting to see what price action takes place on Monday as it may create some levels we can use for trading.

 

AUD/USD – Falling From Supply Zone

After spiking higher due to Yellens speech AUD/USD is now falling towards the lows and it’s looking likely these lows will be broken by the end of next week.

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We can see the first supply zone which we suspected had been created by the bank traders placing sell trades was spiked early this morning and it looked like that was going to push the market down through the lows. Soon after this had taken place some large bullish candles appeared and pushed the market through the high of the supply zone. After spending the next hour falling Yellen gave her speech and the price shot up into the second supply zone where we thought the banks had placed sell trades.

Selling then entered the market and pushed the price down enough so that the candle ended up closing near to where it opened, now the price has fallen even more it seems like it’s only a matter of time before the lows get broken and the downtrend ensues. Similar to USD/JPY I belive it’s best if we wait till Monday to see if any new levels have formed because at the moment nothing stands out as being worth trading.

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