Forex Price Action Setups (NY Close) May 7th

EuroZone Elections Cast Dark Shadow on Recovery
Elections in Greece and France mark the next two European countries to lose the controlling parties and heads of state that were apart of the bailouts all suggesting the political support and will towards the austerity plans along with the bailouts just isn’t there.  This only renewed the fears about the shakiness in the EZ and exacerbated worries the zone might not hold.

The main driver was the Greek elections with the main parties failing which is now creating doubt they will maintain their membership in the program, either by a) leaving on their own will or b) not keeping the agreements of the bailout.

At the current rate, Greece will run out of cash by end of June if it doesn’t get the gov’t with the program to receive the next tranche.

Then France changed parties with Sarkozy losing the re-election bid, and considering he was Germany’s main ally, which could possibly cause a) France pulling their support for the continued bailout and b) a German led austerity package which may not remain popular for long.

The result was global markets got hammered across the board with the DOW selling off 29pts or .23% and the FTSE losign 111.49pts or 1.92% on the day.  Asian markets dropped over 2.5% across the Hang Sang and Nikkei.

Obviously the Euro got punished gapping down on the open losing 125pips and the 1.3000 handle before regaining the figure to close above it for the day.  This was either China stepping in to defend the key level which they have admitted to in the past, but regardless, the pair looks vulnerable and we cannot imagine traders getting excited about holding Euros near term.

It should be noted the economic calendar is a little light tomorrow so technical trading should dominate price action moves.

EURUSD – Forms Pin Bar off 1.3000 Figure
After getting hammered from the EZ elections last weekend, the EUR/USD formed a daily pin bar off the 1.3000 big figure telling us there is some downside support.  We suspect this was either technically driven or Chinese buying to defend the level.  Although the pair has sold off for 6 days in a row which may seem like a lot, the pair has not reached over-sold territory as the selling has not been overly impulsive.  The 1.3000 floor has held price for a while as no close has happened below it since early Jan. this year which suggests likely manipulation at work as the pair should not have been contained in a virtual 400pip range for over three months now.

If the intraday price action pulls back towards 1.3000 and looks timid at best, then perhaps the level will hold short term and offer a possible buy targeting 1.3100 and 1.3150 near term.  However, we will look to sell rallies, perhaps into the dynamic resistance above in the 20ema so watch for price action triggers here as the pair has formed a series of two LL’s (lower lows) suggesting the technical structure is attempting to turn over.

daily pin bar forex price action trading may 7th

Another Notable:

We would also like to note the Dow index formed a pin bar setup on the 4hr time frame after closing the gap so this could setup a possible short term trading opportunity.

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Upcoming Economic Announcements:

AUD Trade Balance (Australian dollar) 01.30GMT 21.30EST
EUR German Industrial Production n.s.a. and w.d.a. (YoY) 10.00GMT 06.00EST
CAD Housing Starts 12.15GMT 08.15EST
NZD NZ Card Spending – Retail (MoM) 22.45GMT 18.45EST

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I'm Chris Capre, Founder of 2ndSkiesForex. I help traders of all levels change the way they think, trade and perform. As a professional trader, I specialize in trading price action. As a teacher, my passion lies in showing you how to re-wire your brain for successful trading. Want to improve your edge right now? Visit my Price Action Course page.

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