Market Commentary 24/10/16

EUR/USD – Small Rise Out Of Daily Buy Zone

Today we have seen the market make a small rise out of the daily buy zone it entered just before the market closed last Friday.

I don’t think this small move higher is the beginning of the reversal which I expect will push the market back into the daily supply zone seen above. I think it’s much more likely this is just a retracement caused the banks taking some profits off the sell trades they got placed when the market spiked higher last week. The size of this small move higher also suggests that it’s not the beginning of a reversal. Usually reversals will start with some kind of sharp movement higher or lower which will consist mainly of large range candles.  The movement seen above is not considered to be sharp because the bullish candles which form the move up are only small and they don’t cause the market to move a large distance out of the daily buy zone.

I still believe we are going to see another drop take place deeper into the daily buy zone before the market reverses, I’m not exactly sure how far the market is going to drop into the zone before it turns and moves higher but I would guess that it will probably be near the 1.08000 level as large reversals tend to begin when the market is in close proximity to a big round number.

 

USD/JPY – Moving Higher From Demand Zone

The demand zone which was in the process of forming last Friday was hit earlier today, and the market is now rising up towards the sell zone found at the 104.500 level.

If you remember I said in Friday’s market commentary how the demand zone would be valid for trading if the move out of the buy zone continued. You can see from the image how the move did continue with another bullish large range candle forming two hours after the market entered the buy zone. The market hit the demand zone early this morning when the London trading session opened, it would have been tough to get an entry long using this demand because when the market hit the zone it only spiked the outer edge, it didn’t really drop into the zone and produce a signal to get long like a bullish engulfing candle.

Despite the fact it was tough to get an entry long, I don’t really think it’s a big deal because a new demand zone is currently in the process of forming. You can see this demand zone has formed from the move up out of the previous demand zone we saw this morning. It’s my belief we’ll see the market move into the sell zone before falling out of it into the new demand currently being created now. Once it’s fallen back into the demand, I think a large move higher take place and push the market through the October high towards the daily supply zone seen around the 106.000 level.

For entries long keep an eye on the demand zone created by today’s move higher. If the market falls out of the sell zone into this demand, be on the lookout for bullish engulfing candles.

 

AUD/USD – Falling From Supply Zone

AUD/USD is currently moving lower after hitting the supply zone I said to watch for entries short in last Friday’s market commentary.

With the market now falling, I think it’s only a matter of time before we see the price drop through last Friday’s low and enter the daily demand zone seen at the bottom of the image. I don’t think the 1 hour demand zone I marked last week (marked with an X) is going to cause any up-movement to take place as it was my belief the retracement into the supply zone was going to begin when the market entered this zone. The fact the price turned before this zone was reached leads me to think that maybe I drew the wrong zone and should have actually marked the demand zone above as the point where the retracement would begin from.

For now I would just wait until the market has entered the daily demand zone before going long, if you see the market re-enter the supply zone which has caused today’s drop to take place watch for an entry short as this is now a sell zone which the banks might use to get more of their sell trades placed into the market.