ForexGen | Euro, British Pound Retrace as Risk Trends Look Uncertain

The Euro and the British Pound pulled back from US session highs in overnight trading as mixed results on Asian stock exchange painted an increasingly uncertain picture of risk sentiment. UK Gross Domestic Product and German CPI are set to offer predictably dour results, with forex traders likely looking past the European calendar to US releases for direction cues.

Key Overnight Developments

• Euro, Pound Pull Back From NY Session Highs

• Risk Trends Murky as Stocks Send Mixed Signals Overnight

Critical Levels




The Euro pulled back below the 1.30 level in overnight trading having reached as high as 1.3080 in during the US session. The British Pound followed suit, edging towards 1.53 having fallen over 200 pips from the high at 1.5534.

Asia Session Highlights




With no market-moving data on the economic calendar, trading in the forex markets took on a corrective tone overnight with the US Dollar recapturing a bit of lost ground after the sharp selloff in the US session. The greenback tumbled as risk appetite rebounded just before the opening bell on Wall St when the Federal Reserve announced it would commit up to $800 billion to boost credit access for consumers, homebuyers, and small businesses. The central bank said it would offer $200 billion in a program to extend lending directly to credit-seekers as well as spend $600 billion on buy up debt issued or backed by government-chartered companies like Fannie Mae and Freddie Mac. US Treasury Secretary Henry Paulson said the direct $200-billion facility was just a “starting point”, stressing that “It’s very important that lending continue to be available” in the absence of private firms’ willingness to dole out loans.

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ForexGen | EUR/USD Trade

This is an example of the method at work.

The first chart is of the 4 hour EUR/USD.

The main trend as determined by the 89’s and 144’s has been in buy mode for the last 40 days.In fact it has been in buy mode for much longer but the charts I use only show 40 days at a time.

The TI does not need to move from down to up or vice versa before you can trade.It does however need to be in the same direction at the time you enter the trade.

Market Commentary With ForexGen

Nothing too exciting with mostly month, quarter, fiscal year end activity dominating market movement. Euro-zone inflation jumped to record highs, IP in Japan continued to fall taking the Nikkei with it down 2.3% on close of Japanese fiscal year.

JPY - It was all about the fixing. Closed soft in New York on Friday, continuing into the Sydney open, dipping below 98.85 before Japanese fixing demand drove it 140 points to print 100.16. Exporters were at the ready once again above 100 and things are now just a tiny bit higher than where we left them on Friday. Topside offers are expected to remain in place although on this rally a few specs took advantage and light stops have gathered 100.30-50; downside, little to support until low 97s. Eurjpy continues to hover around the 55d, with offers above 158 still capping.

EUR - Record highs in inflation data will add weight to the ECBs concern and gave them more to worry about with Euro. EURUSD has set higher lows over the last week and a short term pivot on the hourlies would be 1.5760. Below there we would expect a look back to 1.56 but still maintain a dip buying mentality while the ECB remains in this dilemma. 1.60 is just a matter of time and with good stops gathering above the old highs it could be sooner rather than later.