Market Commentary 27/01/17

EUR/USD – Retracing Back Into Daily Supply Zone

The reversal out of the daily supply zone we saw take place yesterday has not continued today, with the market instead stalling just above yesterday’s low. Over the course of this afternoon the market has begun moving back up towards the daily supply zone again, but I think this move up has been created by the banks as a means to get more sell trades placed into the market around the point where the supply zone created by the drop has formed.

You can see from the image how the market came down and almost broke through yesterday’s low early this morning. The fact the market began moving up right at the point when the London trading session began suggests that the London traders still had some profits left to take off the sell trades they placed at the highs of the consolidation. The bearish pin bar which formed an hour ago may have been created as a result of them placing more sell trades into the market using the buy orders generated from them taking profits off their trades.

It’s not clear yet if this bearish pin bar has actually been created by the bank traders placing sell trades, but if it has then we’ll not see the market break above the high of the pin by a large distance, so watch out for an entry short in the supply zone created by the drop.

 

 

USD/JPY – Falling Out Of Sell Zone

As expected the reversal out of the daily demand zone has stalled after the market reached the sell zone created by the last swing lower. What happens next week is important for understanding what’s going on in the market and if we are actually seeing a reversal take place. The reason why is because the sell zone and the resulting drops is has created could have been caused by the bank traders placing sell trades to make the market reverse. I don’t think it has but it’s still a possibility so we have to watch to see how the drop out of the sell zone we are seeing now is structured to see if there’s any signs it has been created by the bank traders placing sell trades.

The move up into the sell zone has created a new zone I suggest you watch for entries long if the market starts to fall out of the sell zone again. Although this zone isn’t a demand zone so to speak it is a zone which marks the most recent point where the banks came into the market and got a decent number of their sell trades placed. If they have more trades left to get placed into the market we could see a drop into this zone occur, because when the banks have not been able to get all of their trades placed, they like to get any additional trades executed around the same price as where their most recent set of trades have been placed, which is the area I’ve said to watch for entries long.

 

AUD/USD – Moving Towards Supply Zone

This morning the downmove out of the supply zone we had seen begin on Wednesday night came to an end and the market is now moving back up into the supply zone which caused the drop to take place.

Similar to EUR/USD this past hour we have seen a bearish pin bar form. This bearish pin could be an indication the bank traders have got some more sell trades placed into the market to cause the price to drop. More price action is needed in order to confirm this but I think that if the market doesn’t continue moving and doesn’t break through the high of the pin before falling again, it’s a good sign we are going to see the market drop through the buy zone I’ve marked on the image. If this buy zone is broken a move into the demand zone below is likely but I don’t think this demand zone will cause a big reaction to take place in the market due to the fact it wasn’t created by the banks placing a large number of buy trades.

Next week I’d suggest you watch for an entry short in the supply zone which created the last drop lower. Even though I think we are ultimately going to see the market end up moving higher again, I reckon there’s still a chance to make a decent profit if a move down through the buy zone and demand zone takes place, so keep an eye out for bearish engulfing candles when the market enters the supply zone.

 

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