Market Commentary 13/12/16

EUR/USD – Supply Zone Broken

The supply zone the market was reacting to when yesterday’s market commentary was published has been broken, and now it looks like we are going to see the market move back up towards the supply zone created by last weeks drop.

You can see how the market broke through the supply zone literally when my market commentary was being published. Initially the candle which formed previous to the big bullish candle that broke the zone looked as though it was going to be a bearish engulfing, but by the time the hour had come to an end it had transformed into a bullish pin bar.

I think over the course of tonight we could see the market proceed to move up into the area where the sell zone and supply zone are located. The reason why is because tomorrow we have the US interest rate announcement plus the FOMC press conference taking place at the same time. It’s expected that the interest rate will rise which means USD will rise with it. It could be that the reason we are seeing EUR/USD rise now is because the banks want to get more sell positions placed before tomorrow’s announcement comes out. By making the market move up, they cause traders to buy which gives them buy orders to use to get sell trades placed. The last point where the banks have got sell trades placed is the high of the drop that took place last week, if they are going to get more sell trades placed they’ll place them near to where their other trades have been placed which is around the area where the sell zone and supply zone have formed.

Tomorrow I’d watch for entries short inside the sell zone and supply zone. The market probably won’t drop until the interest rate announcement has come out so be careful about where you enter your trade. Also make sure you put your stop above the high of the supply zone seen at the top of the image as a spike above here is possible due to the volatility caused by the announcement.


USD/JPY – Rising After Breaking Through Swing Low

Yesterday the market was falling after it had managed to break to new highs early in the morning. The drop had created a supply zone which I said was valid for trading so long as the market broke through the swing low which had formed just before the market started to make new highs. Last night this low was broken, but I think that now with the release of the interest rate announcement coming tomorrow, it’s unlikely the supply zone is  going to cause any down movement to take place.

What we could be seeing is the inverse to what we might be seeing on EUR/USD. On EUR/USD we’re seeing the market rise so the banks can get more sell trades placed ready for when the news comes out tomorrow. With USD/JPY we might see the market fall so the banks can do the same, only instead of placing sell trades like they are on EUR/USD, place buy trades in anticipation of a move higher. I think it’s possible that if the market does fall over the course of tonight from where it is now, we might see a spike into the demand zone take place when the news is announced tomorrow, so keep an eye on the demand zone when the news is released.


AUD/USD – Stop Run Above High

In yesterday’s market commentary I spoke about how if the market was to close above last weeks high it would be a sign that more upside was likely to be on its way over the next few days. Today we have seen the high broken twice with the second break actually causing the market to close above the high. Even though the market has closed above the high, I don’t think it’s a sign of more up-movement due to the fact a couple of hours ago we saw a very large bearish engulfing candle form.

You can see last weeks high was first broken around midnight last night. This break was a stop run on the buy stops which had accumulated above the high.

Here’s what Oanda’s order graph looked like an hour before the first spike through the high occurred. You can see there was a large concentration of buy stops just above the 0.75000 level where I’ve marked the red dot on the graph. When the market broke the high, these buy stops vanished so we know most of the stops would have been placed at the high.

Here’s what it looked like an hour before the second spike occurred. Again you can see the buy stops had accumulated a small distance above the 0.7500 level. Once the market had broken above the high these stops disappeared which confirmed they had been placed there by traders in the market.

I think the banks have used these two stop runs to get sell trades placed in anticipation of the impending move lower which is likely to take place  when the interest rate announcement comes out tomorrow. The bearish engulfing candle which formed a couple of hours ago may be the start of the move lower which we’ll see develop further when the announcement is released tomorrow. I don’t think the banks will purposely make the market move up to get more buy trades placed due to the fact they were probably able to get most of them placed during the two stop runs we have seen occur.





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