Market Commentary 30/03/17

EUR/USD –  Potential Reversal Out Of Demand Zone

The drop through the demand zone we saw take place yesterday has continued today, and the market is now reacting to the lower demand zone found between the 1.0704 – 1.0737 levels. The profit taking we were seeing when yesterday’s market commentary was published continued during the night, and had caused a small consolidation to form before the market dropped into the demand zone this morning.

Currently we are starting to see the market react to the demand zone. An hour ago a large bullish engulfing candle was in the process of forming, but selling entered the market and caused the price to drop, leaving a large wick on the candle. If the candle had stayed as it was and closed near its highs, it would have been a good sign a reversal out of the zone is going to take place, but as it stands at the moment I think we could see another slight drop deeper occur into the zone before any reversal takes shape.

For now I think you should continue to monitor the demand zone to see how the market moves out of the zone. If a strong move out of the zone take place, it’s a sign we may see a move up through the retracement highs occur sometime next week. If a weak/small move out of the zone occurs, then it’ll be a sign more downside is to be expected next week.

 

USD/JPY – Back Inside Supply Zone

USD/JPY is currently back inside the supply zone we were seeing it fall out of when yesterday’s market commentary was published. Although it has moved back into the zone it has not yet broken through the high, which means there is still a chance the zone could end up causing the market to reverse and break through the current lows.

If it is going to cause a reversal to take place, then some kind of sharp drop out of the zone needs to occur soon. At the moment it just looks to me like the small drops out of the zone have been caused by the bank traders taking profits off buy trades. If they were really getting sell trades placed to cause the market to reverse, then we’d have seen at least one sharp drop occur by now, so the fact we haven’t seen one take place suggests a move up through the zone and into the supply zone above is going to occur quite soon.

As far as trades are concerned I’d start watching the supply zone seen at the top of the image. I’m not confident the supply zone the market is in now is going to cause the market to reverse, so I can’t recommend using it to watch for entries into short trades.

 

AUD/USD – Inside Daily Supply Zone

The market has today manged to move back into the daily supply zone we were seeing it move towards after breaking through the supply zone in yesterday’s post.

Currently we haven’t seen any signs of a reversal out of the zone form, but I think it will only be a matter of time before we do, due to the way the market has been moving over the past couple of days. The move up back into this daily supply zone has not been very strong, with each new higher high being followed by a small retracement taking place shortly after. If the market isn’t going to reverse, and instead continue moving up, some kind of sharp move higher similar to the one which created the current low needs to occur and push the market deeper into the daily supply zone.

For now I’d just continue watching the price action for signs of a reversal taking place i.e a sharp drop which pushes the market below the low I’ve marked.

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