Trading Setups / Chart in Focus:
EURUSD – Euro/dollar loses significant ground after false-break of resistance
In Monday’s commentary, we discussed the current bearish bias we held on the EURUSD and that we were actively watching for price action sell signals forming up near key 1.2950 resistance if the market retraced higher. Today, the market tried to move up to about 1.3000 before selling-off in an aggressive manner into the daily close.
You can see in the daily chart below that the market is showing clear rejection and a false break of 1.2950 area today, this rejection resulted in the formation of large bearish pin bar reversal signal today. As a result, we can expect more downside movement in the coming days with a re-test of key 1.2750 a strong possibility in the near-term. One option for traders who are not already short is to wait and see if price retraces up to around today’s pin bar 50% level, which could provide a 50% retrace sell entry into this downtrend (one of the pin bar entry techniques I teach in my courses).
In the 4 hour chart below, we can see that a fakey sell signal formed today as the market made a false-break above 1.2950 and then quickly reversed. This is a more advanced way to enter a fakey pattern, but an entry could have been taken after the false-break of resistance and as price came crashing back down past the mother bar low intra-day.
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In the currency markets today, the U.S. dollar moved up to multi-year highs against the Japanese yen and other major currencies as Federal Reserve Chairman Ben Bernanke made comments that the U.S. central bank could slow down its asset purchasing program soon.
The U.S. dollar index, which measures the greenback against a basket of other currencies, moved up to 84.42 today, its highest level since July 2010.
The Australian dollar lost around 1 percent to the U.S. dollar today and is lingering near one-year lows.
In the U.S. markets today, stocks lost ground after minutes from the latest Federal Reserve meeting showed that officials might reduce the rate of bond purchases soon.
The Dow lost 80.41 points, or 0.52 percent, the S&P 500 down 13.81 points, or 0.83 percent, and the Nasdaq lost 38.82 points, or 1.11 percent.
Upcoming important economic announcements (New York time): 5/23/2013
3:00am EST: Euro-zone – French Flash Manufacturing PMI
3:30am EST: Euro-zone – German Flash Manufacturing PMI
4:30am EST: Britain – Second Estimate GDP q/q
8:30am EST: United States – Unemployment Claims
10:00am EST: United States – New Home Sales
3:30pm EST: Euro-zone – ECB President Draghi Speaks
6:45pm EST: New Zealand – Trade Balance
10:55pm EST: Japan – BOJ Gov Kuroda Speaks