Market Commentary 23/02/16

My apologies for not giving out yesterday’s support and resistance levels and supply and demand zones or for completing yesterday’s market commentary. I was at a funeral during the afternoon and by the time I got home was in quite a state (i.e really drunk) so wasn’t really able to write about the day’s events, but I’ll try to cover what happened in today’s post.

EUR/USD – Moving Higher After New Lower Low

Yesterday morning we saw a drop take place which pushed the market below the current low which had been made on the 15th February. I said in Tuesday’s market commentary how a break of the low would be a signal the downtrend has resumed, and whilst I still stick by that there is a chance that the move up seen after the market made the lower low has the potential to be a reversal due to the small distance between the new low and the previous low.

The fact both lows are close together in terms of the prices at which they formed at ( there’s only a 27 pip difference between them ) means they could have been created by the bank traders getting buy trades placed to make the market reverse. If this is the case we’ll not see the market move a large distance beyond the supply zone seen closest to the current market price as this is the most recent point where the bank traders have potentially got a large number of sell trades placed. I say potentially because the swing down which caused the supply zone to form could have just been created by the bank traders taking profits off the buy trades placed at the low to make the market fall so they can get more buy trades placed using the new sell orders that would enter the market, not necessarily because they’ve got sell trades placed.

The point you need to be watching for entries is the supply zone closest to the current market price. If this zone has been created by the bank traders placing sell trades and the move up we’re currently seeing is taking place because they want to get more sell trades placed, then we’ll not see the market break a large distance above the zone, as the bank traders will come into the market and get the rest of their sell trades executed around the same point as where they’ve already got some of their trades placed, which is the high of the supply zone.

 

USD/JPY – Sharp Drop Into Buy Zone Lows

On Tuesday we saw the market rise up out of the buy zone and begin moving towards the highs of the daily demand zone. It seemed likely this move was going to continue but yesterday we saw the move come to an end as the market dropped back into the buy zone in the afternoon. Today this down-move has continued and a sharp drop that took place a couple of hours ago has caused the market to fall right back to the low of the buy zone. It’s now looking likely we’ll see this zone get broken either tonight or sometime tomorrow.

If the market does wind up breaking through the buy zone begin watching for entries short in the supply zone I’ve marked with the black lines. A drop will cause this supply to become the most recent point in the market where the bank traders might have got sell trades placed, if they want these sell trades to remain open they’ll cause the market to fall upon it returning to the zone, they won’t let it move a large distance past the highs. If we see the market fall into the demand zone tomorrow ( which I don’t think we will ) watch for entries long, because there’s a good chance the entire swing down we have seen since the 15 February has been created by the bank traders as a means to get more buy trades placed into the market ready for another leg in the up-trend to take place.

 

AUD/USD – Large Move Higher Breaks Supply Zone

In Tuesday’s market commentary I said to watch for entries short in the supply zone that had formed from the drop which took place last week. The market returned to this supply zone twice yesterday once in the morning and once last night in which the down-move caused by the zone continued throughout the early hours of this morning. Both of the down-move caused by the market spiking this supply zone failed to push the market down past the current low, and a few hours ago a large move higher began which has caused the market to move up and break through the supply zone.

The break above the supply zone means that it’s unlikely we are going to see the market now reverse. There is still a chance that it could, due to the fact the high of the supply zone and the high made today are quite close together, but I think that it’s unlikely looking at the price action we’ve seen form so far. If the market begins to drop I suggest you look for entries long in the buy zone I’ve drawn between the black lines. This zone encompasses the swing lows which may or may not have formed because of the bank traders placing buy trades, if they haven’t been able to get all of these buy placed, then a return to the zone could be on the cards either tomorrow or next week.