Market Commentary 29/08/16

EUR/USD – Small Retracement Into Daily Demand Zone

Today we have seen the price of EUR/USD continue to fall but a retracement into a new supply zone seems likely as the banks take some profits off their sell trades.

We can see when the market opened last night the price started to rise but fell around the time the London trading session began. The drop has caused the market to fall into the daily demand zone which I marked in my daily supply and demand zone post. I think this daily demand zone will cause some kind of retracement to occur probably back up to the new supply zone created this morning.

You’ll notice that I’ve marked the area just above the drop as part of the supply zone. The reason I’ve done this is because it’s likely that buy stops will start to accumulate up here when the price begins to rise from the daily demand as traders in open short trades will move their buy stops in order to avoid having their trade closed.

For now I would watch for a bearish engulfing candle to form inside the supply zone marked above. Keep an eye on Oanda’s order graph to see if the buy stops build up around the high, if they do watch for the engulf to form right after their hit.

USD/JPY – Profit Taking Entering The Market

After the huge move higher we saw last Friday it was only a matter of time before some profit taking entered the market.

The profit taking began this morning when the market entered the sell zone created by two previous drops we have seen take place on the daily chart. I don’t think this sell zone is going to cause any significant down-movement and any down-movement which does end up occurring is likely to be contained by the demand zone drawn above.

This demand formed at the point where the retail traders began entering long trades so a move down into zone would mean most of these traders have closed their trades at a loss which means there will be an abundance of sell orders in the market for the bank traders to use to get more long trades placed.

Tomorrow watch for signs of another move higher beginning inside the demand zone.

AUD/USD – Profit Taking Causing Retracement

Similar to USD/JPY we are now starting to see traders take profits off sell trades placed before the drop which took place last Friday on AUD/USD.

The profit taking is causing the market to retrace and I think it’s likely we’ll see the retracement end somewhere inside the breakout zone I’ve drawn on the image. Once the market enters the zone be on the lookout for bearish engulfing candles as these would suggest the banks are getting more of their sell trades placed into the market.