Forex Price Action Setups (NY Close) Apr. 9th

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US Markets Fall from Delayed Reaction to Slowdown in Jobs Report
Global Stocks were hammered with the DOW posting its 4th straight day of losses as global investors returned to the markets with the US session open while London and Asia were closed.  The US Jobs report last week elevated concerns about the US economy with the 120k print, well below the 203k expected while being the smallest increase since Oct. 2011.

Although trading was light today, it was certainly active with the DOW shedding 130.55pts or 1% and the S&P losign 15.88pts or 1.14%. It should be noted both gapped open this week, which although is not uncommon, makes it a little more interesting since it happened to the downside.  This has only happened 3x in the last few years and both resulted in pretty strong sell-offs.

The boogeyman in all this is whether the US labor market is strong enough to survive any possible weakening in China or Europe.  Keep in mind, many of the US banks (read US taxpayer) is on the hook if Europe goes under or takes on heavy losses in Greece or Spain which is continually under pressure with an expected further decline in their housing market.  And if this drops in Spain another 10-15%, we could see massive write downs from the banks and further monetary stimulus from the ECB just to save the already struggling region.

EURUSD – Forms Pin Bar Setup Above 1.3000
After selling off for 4 days last week, in thin trading last week the pair stalled just above the 1.3000 area forming an inside bar formation.  Instead of continuing the trend, the pair rejected off the prior days lows and formed a pin bar setup in today’s trading.  It should be noted liquidity was down with London traders on break for the Easter holiday, but we are guessing with them returning tomorrow, volatility should return back to form.

If price breaks the 1.3030 and 1.3000 figure, then we losses to accelerate down to 1.2900 in a jiffy.  But should this pin bar setup that formed off the 1.3030 3 day lows hold and give a good price action trigger, I expect price short-term to return back to the daily 20ema at 1.3175 before sellers look to get back and make a second attempt to take out the big figure at 1.3000.

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DOW – Concedes Key 13000 Mark
For the first time in almost a month, the DOW has had a daily close below the 13000 mark.  Price action is currently holding below the daily 20ema for now 4 days straight which is the first time this year (last time was Dec. 2011).  This will definitely effect technical models which were either already long (now taking profits), or were considering adding longs and now looking at shorts.

What is also interesting – this is the farthest (point-wise) the DOW has breached the 20ema since Nov. 2011, adding to the further weakening technical outlook.  This could very well be the beginning of the market rolling over.  We are now considering 13045 and 13000 resistance and will look to fade rallies, unless good ol’ Ben Bernanke hits the CTRL + P button.

But we do not expect Ben to hit the panic button and do what all central bankers do well (print money when in trouble), until the US market deteriorates much further.  Overall, the technical picture continues to deteriorate and we are looking for price action triggers to get short until we see price close back above the 20ema.  Keep in mind, the last major run from Dec. 11′ to Mar. 12′ was fueled by thin volumes suggesting low self-esteem in the bull run.  Thus, it could very well be the impulsive push from early March  was the final hurrah before the upcoming fall.

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