Market Commentary 18/01/17

EUR/USD – Slight Drop Out Of Daily Supply Zone

Yesterday we saw the market break through the daily sell zone it had been reacting to over the past couple of weeks. With the sell zone broken I said how it’s likely we are going to see a move into the daily supply zone found above take place, and today we have seen the market move into the supply zone and subsequently drop back out.

As you can see the drop out of the supply zone has not been very strong which suggests that the drop is more likely to be a retracement that it is a reversal out of the  zone. If it was a reversal I’d expect the drop out of the zone to be much sharper with bearish large range candles forming and little buying taking place during the move down. With this drop, you can see there has been quite a lot of buying taking place as the market has fallen and the bearish candles which make up the drop have not been that big so at the moment this drop is probably just a retracement.

For now I’d suggest waiting until the market has moved deeper into the daily supply zone before looking for entries short. If, over the course of tonight the market ends up falling back down to the demand zone created by the most recent move higher, I think the drop could be a signal the market is reversing, which means the source of the drop needs to be watched for short entries as the banks will probably still have some sell trades left they need to get placed into the market.


USD/JPY – Rising Towards Supply Zone

The deep drop into the daily demand zone we were seeing take place yesterday has not continued today, and the market is now moving back up towards the supply zone that formed as a result of the drop.

Similar to the move out of the daily supply zone we’ve seen on EUR/USD, this move up out of the daily demand zone so far does not look like the beginning of a reversal. This could all change of course if we see the market continue to move higher tonight, but at the moment I don’t think this upswing is a reversal out of the demand zone, I think it’s a retracement caused by the banks traders taking profits off the sell trades they’ve got placed during the move down into this zone.

As far as entries are concerned, the supply zone created by yesterday’s drop is a place where I think you should look for entries into short trades if the market moves into this zone tonight or tomorrow, if we don’t see a move into this zone take place, watch for the market to drop deeper into the daily demand zone.


AUD/USD – Profit Taking Entering The Market

In yesterday’s market commentary we saw how the market had moved up and broken through the daily sell zone which had caused a retracement to take place the prior day. This up-move has not continued today with the market instead consolidating below yesterday’s high. This consolidation has probably been caused by the bank traders taking profits off their buy trades, as when yesterday’s move higher took place it will have caused the buy trades they’ve got placed to go into a large amount of profit, and naturally the first thing you’d want to do upon having a trade go into a large amount of profit is take some of that profit off to make sure you don’t lose it.

Over the past couple of hours we have seen the price rise a little so this profit taking could actually be coming to an end soon, which means another move higher might take place during the night. The good thing about seeing another move higher take place, is it will probably create a new demand zone we can use to look for entries into long trades, so if we do see the market rise tonight watch for a demand zone to form at the source of the up-move as a move back down to hear is likely to take place.

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