Forex Price Action Setups - Euro Hits Near 2-YR Low, Grexit Fears Persist May 23rd

Euro Hits Near 2-Yr Low, Grexit Fears Persist

The Euro got hammered in NY trading dropping 120+pips in about 3 hours as the EU summit didn't really calm any fears of an eventual Grexit from the EZ.  Of course EZ officials telling members of the currency bloc to prepare contingency plans for an exit are not helping. 

Oh yeah, did we forget to mention European banks have the highest loan-to-deposit ratio in the world (3x that of the US banks)?  How do you plug €11Trillion Euros in deposits?  We don't know, but don't see it happening easily.  

Meanwhile the stalemate between Frau Merkel and France's Hollandaise sauce about the Euro bond program is only exacerbating the mass exodus out of Euros.

Meanwhile, investors are fleeing any high yielding currencies like the AUD, NZD mostly piling into JPY and USD which have been across the board gainers this week.

NZDUSD -  Stubborn Little Buggar

While we want to avoid trading EURUSD as the political winds are too volatile, along with a record number of shorts, we prefer buying JPY's as a whole.  But one pair is sticking out intraday as being the most resistant as of late to the USD and that is the NZD.   Although the pair did sell off against the greenback twice today on an intraday basis, it has rallied to recover all the losses and is now sitting at a critical role-reversal level (.7525).   What we are noticing is how after the 24hrs of straight selling, the pair formed a bullish pin bar strategy off the .7460 level, immediately printed a bearish engulfing bar, only to print a piercing bar right after telling us buyers are down there willing to prop it up as the pair looks over-extended.

The current 4hr bar is showing another pin bar with a higher low suggesting the buyers came it at a worse price and higher level feeling confident enough intraday to prop the pair up and work for higher ground.  If the pair can clear the .7525 level, along with .7560, then we could see a return back to .7620 and .7670 so watch for intraday price action clues for possible more upside play.

Any moves back to .7460 are also potential levels to watch for intraday longs but a break here suggests downside play to .7369 before new buyers will consider stepping in.

price action forex trading pin bar strategy engulfing bar may 23rd

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Comment by No more on May 24, 2012 at 8:34pm
Very nice comment, clear and wise. Thanks Peter. Regards
Comment by 2ndSkiesForex on May 24, 2012 at 8:59pm

Hello Peter,

I certainly agree, America is a mess as it has a bought congress, the politicians are controlled by bankers and big corporations, the legislative process is frozen, a student loan bubble which is out of control, a debt which has gone parabolic on the parabolic curve itself, and the middle class is being wiped out in one of the largest wealth extractions in history which has led to a fractured culture to say the least.

Its very possible American has seen its zenith and we are witnessing that.  Hard to say but all empires rise and fall and the UK and Europe know this all too well as they have risen and fallen before only to be succeeded by the next which as most recently - the US.

As to whether the US's problems are far worse than Europe - that remains to be seen.  The UK is probably in better shape then the other two, but its trailing right behind.  

As to whether more of the world will have more faith and trust in Europe - which parts of Europe are you talking about because money is leaving Europe at an astounding rate, and there are no bank runs in the states as of yet (key word...yet....).

Although I don't think all the US banks want Europe to fail.  JP Morgue it turns out was heavily invested in Europe.  Didn't you find it weird that once they started to unwind their big positions to offset the losses from the BIGGG derivative positions they held in the IG9 index that the Euro collapsed, the USD gained while Gold and Silver also gained vs. the USD?  We all knew JP Morgue was short Gold and Silver, but its very likely they were actually long the Euro as well and many of their comments suggest they are heavily (or were) positioned in the Euro so I would not say all US banks want Europe to fail.  

But if history has anything to say about it (and it usually does), the center of power has always shifted from debtor nations to creditor nations, and in the camp of debtor nations is the UK, US and Europe, while almost all the creditor nations are in Asia.  And that is where the money and power is shifting to, and will likely continue to.

So I think all three lose for the most part unless they can all get their act together which none seems to be able to do, and I think the power (and money) will shift towards Asia.  

I certainly agree with you 95% of the worlds population is not America and the people that need to realize that the most are the people who live there.  

As to what happens, next, hard to say, but a reckoning needs to happen for what is going on now is unsustainable.  Perhaps you haven't noticed, but there is a reason I live in a small country (Uruguay) with a small population where they know how to manage things well (similar to Singapore, Switzerland, Norway, etc).

Interesting times ahead for sure - hopefully ones we learn from.

Kind Regards,


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