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Forex Price Action Setups (NY Close) Apr. 18th
All Eyes on Spain
If the markets had a personality that was based on the sentiment of the day, there would be one word to describe such a personality – bi-polar. It just takes one piece of good news to make almost every one a bull, and one thing out of the US, Europe or China to sour the elation from the day before.
Yesterday it was the better than expected German ZEW report which helped put risk back on the table.
Today, it’s sour grapes out of Spain (Europe’s 4th largest economy) with worries over the Bank of Spain announcing the cost of their loans are rising and have surpassed 8% (1st time since 1994). Then Italy decided to join the party with their non-performing loans (read bad-debt), has reached €107.6 billion with domestic deposits rising 1.6% while foreign deposits declined 16% (y.o.y). So as the money flees, the cigarette about to be dropped in a dry forest called Italy, is turning into Greece which means its next on deck to require funding since none is coming in and what is there is leaving in droves.
This will continue to weigh on the EUR and send money into safe havens. Keep in mind we have the big Spanish auction of 2014 and 2022 bonds manana. If this goes bad, expect the markets to sell off broadly and the EUR to lose ground.
Oil – Pin Bar Setup…Building a Medium Term Base?
Oil for the month of April has been attempting to form a base since the sell-off from the yearly highs at $110 back in late Feb. this year. The sell-off we would note has been rather corrective in nature and has not really demonstrated a passion for selling. This tells us two things;
1) the sellers are not at all confident about defending the upside or making new ground
2) the market is likely underpinned and attempting to form a base above $100 a barrel
We think the latter is the more defining aspect of the market and it is only a matter of time before the market starts gunning for the $110 level again.
Looking at the 4hr chart, we can see a series of two LL’s (lower lows) followed by strong buying and two HL’s (higher lows) suggesting the base might be in place. Price action just formed a pin bar setup off the $102.15 support level which happened after very strong selling. This begs the question – what happened to all the sellers from the prior candle? This could give bulls an opportunity to get in so look for a pullback into the level with stops near $101.50 targeting the most recent swing highs at $104/104.50 offering a nice 4:1 reward-to-risk play. More than likely you should see a price action trigger on the 1hr chart if this will play out.
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Upcoming Economic Announcements:
|AUD NAB Business Confidence||01.30GMT||21.30EST|
|EUR Spain to Sell 3.3% 2014 Bonds||08.30GMT||04.30EST|
|EUR Spain to Sell 5.85% 2022 Bonds||08.30GMT||04.30EST|
|EUR Euro-Zone Consumer Confidence||14.00GMT||10.00EST|
|USD Existing Home Sales||14.00GMT||10.00EST|
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