Market Commentary 08/09/16

EUR/USD – Run Higher Currently Being Engulfed Lower

Yesterdays stop run made it seem like a retracement was going to take place but the market failed to move down to the support level which I’d marked and instead turned around the point where yesterday’s lows had formed.

The marked turned at the lows a couple of hours after the stop run had taken place and from there started to move higher. Initially the move higher was only small but it picked up pace when the London trading session began at 8:00am this morning, the minimum bid rate news was then released at 12:45 and caused the market to make a sudden move higher, this was followed by the ECB press conference and the USD unemployment rate news at 1:30pm which caused significant volatility in the market for the next couple of hours. Now in the past two hours we have seen the price fall although it’s difficult to determine at the moment if this fall is because the banks are getting sell trades placed to make the market reverse or if they’re simply taking profits off buy trades placed before the big move higher occurred on Tuesday.

Currently I’m leaning more towards the idea that it’s from them taking profits off the buy trades they placed last week but you could make a good case for both theories being true. I think the point we need to be watching is the demand zone created by the move higher that started last night and has taken place over the course of today.

If this demand has formed because of the banks placing buy trades then they might not have had enough sell orders coming into the market to get all of their buy trades placed when the zone formed, this means they would have to cause the market to fall back into the zone in order to entice traders to place sell trades which they can use to get their remaining buy trades placed. If this is the case then the banks will not want the market to break through the low of the demand zone which is why it’s so important to current market structure.

Keep an eye on the demand zone tonight and tomorrow and watch to see if any bullish engulfing candles form inside the zone as this would be a good indication the banks are getting their remaining buy trades placed.

USD/JPY – More Profit Taking Leads To Consolidation

Today we have seen the banks continue to take profits off the sell trades they placed when the market fell on Tuesday.

I think it’s best to see which direction the market breaks out of this consolidation before placing any trades, I still believe the market is more likely to move down into the demand zone seen just below the consolidation than it is to start moving up again but we’ll have to wait and see. For now just sit tight and monitor the price action as it appears on your charts.

Note: When I was writing this the market was still consolidating but I can see now that a move higher has taken place, this move has formed a demand zone where I suggest you look for entries long if the market returns to it tonight or tomorrow.

AUD/USD – Possible Bearish Pin Bar Forming On Daily Chart

A move higher which began this morning terminated with a move down which is currently still taking place, if things remain as they are now we may see a large bearish pin bar form on the daily chart by the end of the daily.

You can see how the market is currently reacting to the demand zone which formed when the price moved up this morning, if this demand zone holds and is able to push the market back up towards the highs of today’s move down then the daily candle is unlikely to end a bearish pin bar and it’s probably a good idea if you don’t trade it as such if it still looks a little bit like your typical pin bar i.e a candle with a small body which has a wick on it.

The supply zone I’ve drawn from the top of today’s move down is only valid for trading if the market is able to break through the lows of the demand zone which the market is currently reacting to, a break through here would suggest today’s drop has taken place because the banks are getting sell trades placed to make the market reverse and there’s a high chance they have not been able to get all of these sell trades placed due to a lack of buy orders coming into the market. If they want to get any remaining sell trades placed they would have to make the market move back up to get more people to buy so they can use the orders to get the rest of their sell trades placed. The important thing is they’ll tend to do this close to where they have got their other sell trades placed which we suspect is the high of today’s move down.

Watch to see if the market is able to break through the lows of the demand zone or if the price starts to rise up towards the high, if it rises towards the high without first breaking the demand zone then I would stay away from selling when it reaches the zone but if the market breaks the low of the zone and then goes on to rise into the supply zone watch for a bearish engulfing candle t0 form before going short.