Market Commentary 05/12/16

EUR/USD – Large Recovery After Italian Referendum

On Sunday the results of the Italian referendum were released and initially it had a negative effect on the price of EUR/USD with the market falling 155 pips by the end of the hour the results were released. After a small retracement the market started to drop again but this drop failed to push the market through the low made by the drop and the market began to rise higher. By lunchtime the market was trading above the pre-drop highs and currently it’s now pushing into the sell zone created back on the 17th November.

aviary-photo_131254251035457931Today’s drop came to an end close to the point where we suspected the banks had got buy trades placed. Like I always say, nearly all reversals will consists of multiple swings forming in the opposite direction to which the reversal is going to take place. This is due to the banks not having enough orders coming into the market to get all of their trades placed. We wouldn’t have known when any additional swings were going to form in this reversal, but we would know ( using our understanding of how the banks trade ) that any more swings were likely to terminate close to where the others swings have formed due to the fact the banks like to get their trades placed at similar prices which is what you can see with the two swings marked with X’s in the above.

Today’s swing came to an end only 12pips away from the swing that formed on the 24th November. That swing and the buy zone it created were much stronger than the swing which created the upper buy zone because of how many sell orders were entering the market at the time that it was created. Because there more sell orders coming into the market, it meant the banks could get a much larger number of their buy trades placed, meaning any additional swings were likely to terminate close to where this swing had formed which is what we saw with today’s drop.

The market is now inside the sell zone and I think we’ll see a retracement take place out of this sell zone sometime during the next few days. For entries there isn’t any levels we can use at the moment but the retracement will probably cause a demand zone to form so maybe we cause use that to look for a long trade.


USD/JPY – Moving Towards Last Thursday’s High

The results of the Italian referendum did cause a gap and a slight drop to take place on USD/JPY last night but the market has since stabilized and is now close to breaking through the high made last Thursday.

aviary-photo_131254261626393320I’m not sure whether we are going to see the market break Thursday’s high today or not, but looking at the charts now it does seems like we’re probably going to see a drop take place sometime over the next few hours. If we do see a drop take place, I would say to keep an eye on the upper demand zone seen in the image. This demand has been created by the move up which began last night, it’s possible if the market drops we could see it turn once it reaches this demand.

Personally I would want to see the market break through the high before looking for trades at the demand zone, but I think it’s worth watching for entries long at the zone even if the market doesn’t break the high, due to the fact we could end up seeing this zone turn into a new buy zone which the banks may use to get more of their buy trades placed for the next move higher.

AUD/USD – Pushing Into Sell Zone

After spending the majority of this morning falling towards last Friday’s lows, this afternoon AUD/USD has started moving higher again and is now inside the sell zone created by the large drop which took place last week.

aviary-photo_131254278150531649The move up into the sell zone has created a demand zone which I expect will cause some kind of reaction to take place when the market returns to it. I do think we’ll end up seeing the market reverse out of this sell zone and move back down to the daily buy zone seen at the bottom of the image. It’s possible we may see a multi week consolidation form between the sell zone and the buy zone, so I think it would be a good idea to watch for signs of a reversal if the market drops back into the daily buy zone.

For now keep an eye out for large bearish engulfing candles to form inside the sell zone the market has just entered.

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