EUR/USD – Small Drop After Retracement
Yesterday’s sharp move down did not continue last night, with the market spending most of the night retracing back towards the supply zone which was created by the drop. The retracement came to an end around midnight, the market has continued to fall since then but has so far not manged to break through the low of the retracement.
An hour ago a large bullish engulfing candle formed, the question we have to ask ourselves now is will this engulf cause the market to move up and break through today’s high or will the market stall at the high and move back down towards the retracement low ? If it moves up and breaks through the high, it could be the beginning of the reversal and we’ll probably end up seeing the market break through the supply zone that formed from the drop and move towards the other supply zone seen above. If it doesn’t break the high then I think a move back down to the retracement low will definitely occur, possibly with a spike into the demand zone seen below taking place.
For now you need to keep on eye on whether the market is going to break through today’s high or not, if it breaks expect the supply zone to cause some kind of move down to take place, maybe back down to the retracement lows where the up-move has originated from.
USD/JPY – Reversing Out Of Zone
USD/JPY is currently in the process of falling out of the zone I said to watch for a reversal to occur in yesterday’s market commentary.
It’s to early to say for sure whether this move out of the zone is the beginning of the second downswing created by the bank traders placing sell trades to make the market reverse. The way the market looks at the moment I think it is, but it’s best to wait for more price action to form before being certain on it. If the down-move continues and the second downswing does form, expect it to come to an end somewhere inside the green box seen at the bottom of this move higher.
I’m not sure how many swings will form before the market reverses but usually its two or three for non consolidation reversals i.e reversals that occur after the market has been consolidating, so we might end up seeing a third downswing form before the market moves out of the daily sell zone. At the moment it’s best to just keep an eye on what the market does over the next few hours, if you see the market continue to fall then the second downswing will be confirmed, if it doesn’t fall and instead begins to rise from its current position, watch for the second downswing to form after the market has broken the 113.920 high.
AUD/USD – Heading Back Towards Supply Zone
The second move back into the supply zone we saw taking place yesterday did not manage to break through the zone, with the market beginning to fall out of the zone just after midnight last night.
As you can see from the image, the drop out of the supply zone was not able to break through the low that formed last Friday which meant the current outlook in the market is still one of more upside. In the past hour we have seen a bullish large range candle form. This candle could mark the beginning of the move up which will finally break the supply zone which caused last nights drop to take place. It may even push the market into the upper supply zone where I expect we might see the retracement come to an end.
There isn’t really much we can can do on AUD/USD until the market reaches the upper supply zone, when it reaches this zone watch for signs of the market reversing back out of the zone.