Market Commentary 22/01/2016

EUR/USD – Nearly Had Me Fooled

Today we saw a significant decline in EUR/USD.

Seeing the market recover after the news came out yesterday led me to believe we were in still in store for more upside movement.

As you can see this was clearly not the case, the market began falling around 1am last night during the Asian session and continued to fall for the majority of the day, only stopping briefly when the European session began. Luckily what could have been a difficult day ended up quite successful as I did manage to get two trades placed.

Currently I’m in two positions on EUR/USD using the scaling in method outlined in this article.

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Usually I would have taken the second trade at a higher leverage, but at the moment I think the current downside on EUR/USD is limited to the 1.07613 level with the selling capped by the low of the news release yesterday. This low should act as a cap during the market open on Sunday night through until Monday morning when the European session resumes.

USD/JPY – Beginning Of The End ?

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My current long-term view on USD/JPY  is one of huge downside movement.

Looking at the length of the overall trend on USD/JPY its clear to see things may be overvalued, this trend has been in place for long duration of time with the only significant pullback taking place right at the beginning of the trend way back in September 2012.

I think overall next week we could see a little more upside movement on USD/JPY which will be beneficial as I’ve got  a pending order to sell ready at the 121.900 level (marked with a line marked on the chart). The reason I’m selling here is due to the fact that if you look at the swing highs which have been made previously you’ll see they all fall into a relatively similar range, these are the footprints left by the banks placing trades.

Banks will always want their orders filled as closely together as possible in order to avoid slippage, which is why if the market returns to the line marked on the image I feel it would be a good place to short as I know it’s highly likely bank traders will sell here again in order to protect their positions.

Remember: No trend can continue unless people are continuously losing money. If USD/JPY does develop into a significant down-move it will make anybody who is currently long in the trend close their trades, if it goes down far enough people will begin to believe the market has changed from being in an up trend to being in a downtrend therefore the majority of traders in the market will start placing sell trades.

When enough people are short, the banks will come into the market and buy into all the sell orders. When all the sell orders have been consumed the market will break higher and the current uptrend will continue.

Look at the beginning of the uptrend back in 2011 -2012 for a great example of this taking place.

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