Market Commentary 26/06/16

EUR/USD – Supply Zone Broken By Move Higher

The supply zone created by the drop lower which took place last Thursday has been broken by a move higher today.

Although the supply zone has been broken, I’m not convinced we can say the market is now going to continue moving higher  out of the daily supply zone. This is due to how close the two swing highs marked with arrows are in terms of the prices at which they formed at. If you’ve read any of my books you’ll now that when the banks are getting trades placed to make the market reverse, they wont be able to get all of their trades placed into the market at one price due to there not being enough buy or sell orders coming into the market from traders placing trades. This means they have to get part of their trade placed at one price, and then another part placed at a different price. When they do this, the resulting price action will be seen on your charts as multiple swing lows or highs all found at similar but different prices.

Now in the case of EUR/USD the swing high which caused the drop to take place on Friday could have been created by the banks placing part of their sell position into the market, the down-move we are seeing take place right now could be them getting the remainder of their sell trades executed using the buy orders that would have entered the market from the traders placing buy trades because of today’s move higher. At the moment we can’t tell this is the case or not, the points we need to monitor to find out if it is are the demand zone created by today’s move higher and the swing high which formed from last weeks drop.

If the market goes on to break last Thursday’s swing high by more than 30pips it’s unlikely the swing has formed because of the bank traders placing trades to make the market reverse. If we see the market fall from where it is now we have to watch to see what kind of reaction takes place when the market hits the demand zone because if the reaction is weak it’ll suggest the market is going to drop through the zone and it could signal the beginning of a large reversal lower.

USD/JPY – Reacting To 1 Hour Demand Zone

Today we have seen the market drop into the demand zone which formed from the move up that began last Thursday.

In contrast to what I said in Friday’s market commentary, I now don’t think we are going to see this demand zone cause any kind of significant up-movement to take place. I reckon a small move higher will occur from the zone but it will not cause the market to move above the swing highs which formed at the top of the drop. Watch for the move higher to terminate inside the zone I’ve marked above the demand zone, I think once this zone is reached the market will then go and drop deeper into the daily demand zone. When it does watch for entries long because the daily demand zone has a high chance of causing the market to reverse back to the upside due to the fact it might have been created by the bank traders placing buy trades to make the market reverse.

AUD/USD – Moving Towards 1 Hour Supply Zone

Currently AUD/USD is moving back towards the supply zone which formed at the end of last week.

I don’t think this supply zone is going to cause the market to reverse, we may see a small drop take place when the market reaches the zone but this will only be a pause before we see the market move higher again into the daily sell zone found above. When the market is inside this zone be on the lookout for an entry short as we have already seen 3 large drops originate from this zone on the daily chart and I strongly believe we’ll see another take place in the next few weeks.