Market Commentary 15/12/16

EUR/USD – Lows Broken, Downtrend Resumed

As anticipated yesterday’s US interest rate announcement came out as expected with the interest rate rising from 0.50%  to 0.75%. The impact this had on the market was quite big, although if I’m being honest, I did expect some bigger moves to take place due to the hype surrounding the announcement. The drop the announcement caused has today pushed the market below the low made when the downtrend came to an end back in March 2015. This is a strong sign the previous downtrend has now resumed and we’re likely going to see more down-movement take place over the coming weeks.

When the announcement was made no spike into the sell zone or supply zone took place, nor did an up-move into these zones occur before the announcement came out, which meant it was really difficult to get an entry short into this move down. Luckily the drop has created two supply zones we can use to look for entries into short trades when the market moves back up. The upper supply zone created by yesterday’s drop is the stronger of the two zones, but the lower zone created today is also a good place to look for entries short due to the fact we may not see many big retracements take place now the downtrend has resumed.

Tomorrow I’d watch for entries short in the lower supply zone. If we see a move back into this zone be the lookout for a large bearish engulfing candle to form when the market is inside the zone.


USD/JPY – Interest Rate Announcement Causes Large Move Higher

The rising of interest rates from 0.50% to 0.75% caused a large swing higher to take place on USD/JPY. By the time the day had come to an end, the announcement had caused the market to rise 225 pips. It’s now looking likely the overall up-trend USD/JPY was in from 2012 to 2015 might be continuing.

The move up has created two new zones we can use to look for buy trades. The first zone, which is a demand zone, formed from the initial move up created by the announcement being released. I don’t think we’ll see the market return to this zone now, it just seems to me like the up-side momentum caused by the release is too strong for the market to fall all the way back to the zone and then begin moving higher again. I think a much more likely scenario is for the market to drop into the upper zone before reversing and continuing its move higher.

We’ve already seen the market drop into the zone a couple of hours ago but it’s looking like this move is going to fail, which means a deeper drop into the zone is probably going to occur sometime tonight or tomorrow. I think it’s a good idea to watch for a bullish engulfing candle to form when the market drops deeper into the zone


AUD/USD – Significant Drop Puts Focus Back On The Downside

As was the case with EUR/USD we also saw a large drop take place on AUD/USD when the new interest rate was announced.

The drop has pushed the market back into the daily buy zone which caused the retracement to begin back on the 18th November. It’s likely the market will go and break through this buy zone sometime next week, it was never very strong in the first place and the large drop caused by the interest rate announcement confirms the bank traders have been selling to make the market fall. Similar to both EUR/USD and USD/JPY the drop has created some zones which we can use to look for trades.

I doubt we’ll now see the market return to the upper supply zone created by the drop. The market made so many swing highs before the announcement was made that it doesn’t make sense to me the banks need to make the market move up again to get more sell trades placed, due to them being able to get most of their sell trades placed before yesterday’s drop occurred. Even though I don’t think a move back to the upper supply zone is likely, I think a move up to the supply zone created today could occur before the market continues its decline.

I’d watch for entries short inside the supply zone created today. I don’t think we’ll see a move into this zone take place tonight, but we might see one occur tomorrow or sometime next week, so keep an eye out for bearish engulfs if the market enters the zone.

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