Market Commentary 05/10/16

EUR/USD – Falling After Big Spike

Currently the price of EUR/USD is falling after the market made a big spike higher yesterday evening due to the ECB talking about tapering their asset buying program.

When the news was announced the market quickly spiked up into the supply zone I had said to watch for entries short in my market commentary, the price then started to fall and quite a large wick formed on the candle. From there the market started to climb up again towards the high made by the spike, by the time the London trading session had opened the market was only about 10 pips away from breaking through the high, it was at this point where we started to see some selling enter the market.

The drop caused by this selling has created another supply zone we can use to get a possible entry short, I’m not sure if we’ll see the market bounce from the buy zone at the bottom of the image again but if we do keep an eye out for bearish engulfing candles to form inside the supply zone created by the drop.

USD/JPY – Supply Zone Broken By Move Higher

The supply zone which I thought would cause a retracement to take place once the market entered it has been broken today and the market is now inside the daily supply zone where the previous move down originated from.

A bearish engulfing candle did appear soon after the market entered the supply zone but unfortunately it didn’t cause a retracement to take place. Now the market is inside the daily supply zone I don’t think it will be long before we see the market reverse completely all the way back down to the daily buy zone found at the  100.842 – 99.506 levels or retrace slightly to one of the areas I’ve marked on the image.

I personally think it will retrace to one of the areas instead of reversing completely, my long-term outlook of USD/JPY is one of more upside at least back to the 106.00 level, a retracement will definitely take place before we see this occur so be on the lookout for entries long when the market falls into one of the two zones seen in the image.

AUD/USD – Large Drop Into Swing Low

AUD/USD has continued it’s fall which began after the market nearly hit the daily sell zone yesterday afternoon.

The market was not able to break through the swing low created by the last move higher which suggests another small move up may take place before we see the market break through it. Whether we’ll see the price move all the way back up to the supply zone created by yesterday’s drop before reversing or whether it will reverse somewhere in the middle of the swing down remains to be seen.

I think watching for a bearish engulfing candle to appear inside the supply zone is the best thing to do for now, if a drop materializes around the middle of the swing down then a retest could be traded so long as it creates its own supply zone.