Market Commentary 29/07/16

EUR/USD – Market Has Entered Bank Sell Zone

Today we have seen further upside on EUR/USD and the market is now inside the sell zone I marked in yesterday’s post as a place where the banks may come into the market and place more sell trades.

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Judging by the way the market has moved up yesterday and today I would say there’s a high chance the market will break through the sell zone and continue higher, therefore I think we should start looking for opportunities to get long trades placed. Luckily we have had some areas form because of the move higher. It’s inevitable we’ll see a retracement occur because the banks will want to secure some of the profits they have made from this move up, when this retracement takes place it’s likely to end at one of the zones marked in the image.

First up we have the breakout zone that formed earlier when yesterdays high was broken.

I’ve drawn this zone to incorporate the demand zone seen on the 15 minute chart as usually you’ll tend to see retest on breakout zones terminate at supply or demand zones inside the breakout zone or nearby. If the market comes back to this zone watch for a bullish engulfing candle to form before going long.

Next we have the point where the banks placed their buy trades which caused today’s up-move to take place. A reversal from here seems more likely than a reversal at the breakout zone because of the fact the banks may want to get more buy trades placed before another move up.

 

USD/JPY – New Low After BOJ Press Conference

This morning the BOJ press conference took place and caused the USD/JPY to fall below the low created by what we suspected was the bank traders taking profits off sell trades.

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The market almost managed to return to the supply zone which I had drawn from the drop that occurred yesterday.  This drop was caused by the bank traders placing sell trades into the market and it was my belief we would see the market come back up here so the banks could get more of their sell trades placed before the reversal got underway.

Whilst the market did move back up it just missed out on hitting the supply zone by a few pips, the market then moved lower before the BOJ conference took place at which point the price shot up past the swing high that had been made by the drop lower few hours earlier. I can’t say for sure but it’s my guess that this break of the high was a stop run used by the banks to get more sell trades placed into the market.

When the market fell lots of traders would have placed sell trades because they were under the impression the price was likely to continue falling. The most obvious place to put a stop-loss if you sold during this move down was above the swing high, when the BOJ conference was taking place the price rose so quickly the traders were unable to close their trades or move their stops which meant the banks were able to place a significant number of sell positions into the market when the stops were hit.

 

AUD/USD – Up Move Confirms Banks Placing Buy Trades

A large upswing that has taken place this afternoon has confirmed the banks have been placing buy trades at the lows and were not placing sell trades at the swing highs the market made yesterday.

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With today’s move higher it’s now looking like the up-trend the market has been in since the 25th of March is back underway and it won’t be long before we see the 0.7676 high broken. For long trades I think it’s a good idea to monitor the demand zone that formed earlier today. The two swing lows this demand zone encompasses were created by the bank traders placing buy trades, if the market is to return to this zone in the near future the banks will come into the market and place more buy trades to stop the market from falling below the swing lows as it could cause them to lose money.

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