Market Commentary 15/04/16

EUR/USD – Market Entering Supply Zone

The profit taking by the banks has pushed the market into the supply zone we looked at yesterday.

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If the bullish candle which has spiked the zone ends up being a bearish pin bar it may be a signal the pullback had ended and the market it going to continue lower. A bearish pin on its own will not be enough for a short trade we need to see a bearish engulfing candle follow it to confirm the market wants to move down.

In the event that the market does move lower watch for a break below the lows of this current move up, when the market approaches this point its likely a large number of breakout traders will enter short trades which means you can mark the lows as a breakout zone once their broken.


USD/JPY – Momentum Back To The Downside

The momentum on USD/JPY has switched back to the downside with a large move lower taking place early this morning.

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When the market made a new high at the open of the European session it ran into a large number of buy stops which had accumulated between the 109.500 – 109.600 levels.

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On the open orders graph you can see how the buy stops ( colored blue ) were hit when the bullish engulfing candle pushed the price up to make a new high. The banks probably used these stops to place more sell trades in the direction of the trend but we must wait and see if this turns out to be the case as there is a possibility it could simply be profit taking by intra-day bank traders who have been trading long on the pullback.

When the market opens on Sunday we could see a move into the supply zone marked in the first image, this supply has confluence with a breakout zone which formed when the market broke the lows found on the left of the supply zone. If the market makes it back to the zone there could be a the potential of getting a short trade placed.


AUD/USD – Stop Run On 1 Hour Chart

In my last post I said we may see the daily candle turn into a bearish pin bar if enough selling had come into the market by the end of the day, whilst we didn’t end up getting a pin bar it looking far more likely we’ll see today’s daily candle-end up being a bearish pin.

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The important thing we must recognize about today’s price action is the failure to make a new high, this suggests the upwards movement has stalled and the market may be getting ready for a move lower. It could be that the banks are placing sell trades where I’ve marked the two X’s and they are simply waiting for another move back into these highs in order to place the rest of their sell positions.

One more thing which took place that suggests the banks are placing sell trades is the stop run I’ve marked in the image.

It’s unlikely you would have be able to seen the buy stops which were present at this level using Oanda’s open positions graph, the reason why is because the traders who have placed these stops only entered their trades when the market fell on the small down-move which you can see occur before the stops were hit.

This move down made retail traders on the lower time-frames enter the market as they believed a reversal was taking place, their stops are likely to go either at the swing high of the move down or the nearest round number close to the swing high which in this case was the 0.77300 level.

You should watch for a move into the supply zone created by the most recent drop a few hours ago, if the banks are indeed placing sell trades it could be likely for them to get the rest of their positions placed in close proximity to where they have their other trades placed which are two most recent swing highs.

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