In Price Action Trading Strategy

Two, relatively small nations border each other, both packing some of the largest forces on the planet. With images of artillery shells exploding on South Korean mainland being viewed across the globe, it is impossible to ignore the relevance of the provocation taking place. Geopolitical events such as these rock the markets and yesterday we witnessed a large sell-off driven largely by this conflict and sovereign debt concerns heightening in the West.

South Korean equity markets have been on a volatility seesaw and USD/KRW has been following suit. With many people still believing that an all out war between the two nations is unlikely, the markets have reacted accordingly. Already a largely illiquid currency rarely driven by much speculation, it has been rocking back and forth over the past couple of days. KRW sank a little over 2% following the news of the attack and is retracing much of these losses today.

Daily (upper left) Weekly (upper right) 5 minute (lower left) 15 minute (lower right)
Source: QuoteCenter

War instills fear and concern, and while a very touchy subject when it comes to the markets, risk has a hard time staying on with breaking news of conflict. Higher yielding currencies depreciate and equities have a hard time maintaining any form of upwards momentum.

Europe Keeps The Weight On

“European debt concerns” is a popular term these days as they have been a primary driver of higher yielding currencies getting hit. The The Loonie, Australian Dollar, Kiwi Dollar, British Pound and Swiss Franc have all experienced the hit of risk coming out of the currency markets. The U.S. Dollar has of course been the primary beneficiary. The Index itself is up approximately 400 points from its November 4th low.

Meanwhile the US, who hasn't been able to get a break lately in terms of data trends, got one today with a revised 2.5% GDP versus an expected 2.3%. Regardless, the number still comes shy of the median growth rate of 3.05%. Click here for more. From the November 2-3 FOMC Meeting, revisions have dropped, with 2010 targeting 2.4%-2.5% and 2011 at 3.0%-3.6%.

Source: Calculated Risk

In terms of charts, we have some new trendline breaks targeting lower lows in the time ahead. Trends like the one initiated yesterday are hard to kill and we have a lack of liquidity this week coming from the U.S. Thanksgiving holiday. The argument to the current technicals, is the common notion that the markets have a tendency to punish the U.S. Dollar over the holiday….but it's just a notion.

Below are marked up charts of Cable and Euro from my desktop, highlighting some of the most obvious current support and resistance areas. The smaller dashes represent potential targets based on preexisting breaks, achieved or not using a revised DeMark (TD) Lines method outlined in his first book. Keep in mind these have the potential to be change (disqualified) based on price action not yet developed. These also only highlight longer term downside potential based on today's activity, not short term risk. In terms of short term rejections on Eur, keeps your eyes on 1.3446 (diagonal trendline) to 1.3458 (23% pullback, if current lows maintain themselves). Also bear in mind we have gapped activity going all the way up to the high 1.3500's today.

GBP/USD, Daily

EUR/USD, Daily

We will be providing more charts in the days to come on other currencies. I realize I have been covering a great deal of Euro lately as for obvious reasons, the attention has been there. Stay tuned.

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  • wayne theron

    certainly is a lot of points of interest out there currently, it does make things more difficult to assess. nice to see action on the site again 🙂

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