Market Commentary 21/04/16

EUR/USD – Huge Stop Run On 1 Hour Chart

Over the past three hours we have seen massive run higher into buy stops around the 1.13800 level, a big drop has taken place and now the market is trading below the lows made this morning.

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The breakout zone wasn’t retested soon after it was created, which means it was unlikely to give you a successful trade when the market started moving back into it as the breakout traders will have closed their trades. The market declined lower last night and the majority of this morning, it was only when the US trading session began around 12.00pm GMT that we began to see the market move higher.

As the market was moving higher it started encountering small pockets of buy stops, these stops were consumed and the move higher continued, on the final bullish candle you can see before the drop there was a large number of stops placed around the 1.13750 to 1.13900 level.

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The problem with these buy stops was they were all spread out over a price range and there wasn’t a price where there was a high concentration of the stops, this meant trading the stop run would have been difficult as there is a range of prices to cover as opposed to just having one price where you know most of the stops are found.

The resulting move lower after the stops were hit has made a new lower low, I think the downwards momentum will continue next week and tomorrow will be a profit taking day by the banks because of the today’s move lower.


USD/JPY – New Higher High, More Downside Momentum

It seems as though USD/JPY may not be developing into a consolidation as was initially expected.

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A break above what I had marked as the upper boundary tells me we may not be in a consolidation after all, although this is still a possibility if the market moves down to the lows of this whole up-move and then proceeds to move back up again. The new high suggested that we may see more up-movement although with consecutive lower lows this is now beginning to seem more unlikely.

There aren’t really any technical levels we can use as places to monitor for entries, if the move lower had continued then we may have been to use the breakout zone as a place to look for a short trade, since the zone has already been touched the odds of it providing another move lower are slim.

AUD/USD – Stop Run And Drop Lower

We also saw a stop run on AUD/USD although it would have been tricky to locate the stops using Oanda’s graph as AUD/USD is not widely traded by the traders using Oanda.

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You can see the stops had been placed above the swing high, its likely they belonged to the traders who had entered short trades when they saw the market falling yesterday night, the market has been grinding up to these stops over the course of this morning, they were finally hit when the USD news and the ECB conference were being released.

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On the Open Orders graph we can confirm how there were buy stops found at the 0.78300 level.

For the rest of today and tomorrow I would look for opportunities to get short in the breakout zone found in the image, if banks decide to take profit tomorrow which they usually do after a large move has taken place then its likely the resulting up-move could push the market back into the breakout zone which may give us an entry short.


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