Market Commentary 30/03/16

EUR/USD – Yellen Speech Causes Large Move To The Up-Side

The speech by the chairwoman of the Fedral Reserve (Janet Yellen) caused large moves in all markets late yesterday afternoon.

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The move on EUR/USD was dramatic with the market breaking past several swing highs. As the market is approaching the 1.13759 high some profit taking has begun which I’ve marked in the image with X’s. There was a trading opportunity to get long into the up-move from the breakout zone made when the first bit of profit taking entered the market.

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The two entries you could have used to get into this trade were the initial spike into the zone which was a bullish pin bar (or what some traders would call a doji) or the bullish engulfing candle seen after the pin.

The current 1 hour candle is a fast becoming a massive bearish engulfing and the candle its engulfing is a bullish large range candle, I think due to the size of the bearish engulf we could see the market move back near the breakout zone, if it breaks past the zone watch the swing low to see if any bullish price action appears as it could signal the end of the current downside movement.

 

USD/JPY – Big Move Lower From Supply Zone

Yellens speech also had a big effect on the market price of USD/JPY

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I said to watch for an entry short when the market entered the breakout zone marked above, unfortunately the market moved lower literally as I was finishing the article so there wasn’t really any opportunity for you to get short.

If you have read my article on trading supply and demand zones using price action you’ll remember I said large engulfing candles which engulf a really small candle have a higher probability of working out successfully. If you compare the two touches on the supply zone you can see the second touch into the zone resulted in a large bearish engulfing candle engulfing a small bullish candle, compare that with the first touch into the zone in which we only had a small bearish engulfing candle engulf a small bullish candle then its easy to see large engulfs work out much more successfully.

An entry short in the new downmove may come if the market manages to return to the resistance level marked above.

This resistance falls inline with the first instance of profit taking by the bank traders who sold short at the top of the up-move, which means this was the point where retail traders began selling into the downmove, if a large bearish engulfing candle forms around the resistance level it could give us a nice entry short.

 

AUD/USD – Significant Move Higher Suggests Continuation Of Up-Trend

The price of AUD/USD advanced during Yellens speech, it looks as though the up-trend will now continue.

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Similar to EUR/USD we saw small bouts of profit taking come into the market in the hours after the speech, one of the small pullbacks caused by this profit taking created a demand zone on the 1 hour chart.

If the market drops from its current location which its highly likely to because of the big bearish engulfing candle then the next place the market will encounter is the demand zone. There was a breakout zone created by the first bit of profit taking but the market has already came in close contact with this point so its unlikely for there to be any breakout traders still present in the long trades.

Focus tomorrow on if the market returns to the demand zone, if it does watch for price action signals to get long.

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