Market Commentary 28/07/16

EUR/USD – FOMC Causes Large Move Higher

The retracement that was taking place at the time I published my last post came to an end when the FOMC was released and caused the price to rapidly increase above the highs where we suspected the banks had placed sell trades.

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Initially it looked like the price was going to drop through the lows when the FOMC came out as the price fell right down to the point where the current low was located before moving higher. When the price started climbing all the traders who had placed sell trades when the price fell will have begun closing their trades at a loss as the move up causes their positions to start losing money.

When they close their trades buy orders are put into the market which increases the speed at which the price rises up, causing even more traders to then close their trades and thus making the price rise higher. The move up means the banks have not been placing sell trades in anticipation of a reversal at the points marked with the X’s, they have placed sell trades there as evidenced by the fact the market fell but those trades were not placed

I think there is a strong possibility we are seeing the market develop into a consolidation, if this turns out to be true the sell zone marked at the top of the image is the point we want to be watching for possible entries short. This area was created by the banks coming into the market and selling, a break above here would tell us the banks are not interested in selling any more and are happy with letting the price continue rising which would change our outlook to one of more upside.

 

USD/JPY – Falling Towards Retracement Low

The FOMC release has made the price of USD/JPY start declining down towards the low of the retracement made when the banks took profits off their sell trades.

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There’s a high chance this drop has been caused by the banks placing more sell trades into the market, this is what I personally think is taking place looking at the current structure but there is a chance the retracement was caused by the banks placing buy trades into the market because they want the price to reverse. If this is the case the demand zone needs to be monitored for bullish engulfing candles as this is the point where the banks placed their buy trades, they will not want the price to break through here as it would cause their trades to begin losing money therefore the market wont break below here

My view is that the current drop has been caused by the banks placing sell trades, this means the points where they have placed these trades cannot be broken if the price starts to rise again. The supply zone closest to the current market price marks the point where the most recent of these sell trades have been placed, if the market comes back up here look for a bearish engulfing candle to form as an entry into a short trade.

 

AUD/USD – Rebound After Falling Into Demand

The big spike we saw yesterday was suspected to have been created by the banks placing sell trades into the market but with the release of the FOMC news it seems like that might not be the case.

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The FOMC caused the market to fall into the demand zone which made it bounce higher back towards the spike where the banks may or may not have placed their sell trades. I don’t know if the bounce from the demand zone is from the banks taking profits off the sell trades they might have placed at the high of the spike or from them placing buy trades to make the market reverse.

We have seen the market begin to fall over the past few hours and it’s possible that this fall is from the banks placing more sell trades using the buy orders generated by the move up. We’ll just have to wait and see with this pair, at the moment there isn’t enough price action to come to a valid conclusion on where the price is likely to move next.

 

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