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GBP/USD, EUR/USD, EUR/JPY Forex Commentary March 22, 2012

This is level 3 trading for us guys. The EUR/USD tried to make a break to the topside but showed it was merely a stop run as they collected orders for 4hours then ran price down to trigger any stops of long positions only to run it back up to trap more long positions before the 100 pip run down. I know a few members did catch that move. Good job guys. Personally I was in the EUR/JPY short and entered at the end of the Asian box (early) and once price moved off I tightened the stop and it was hit on the stop run -10 pips.

Having said that there was a nice long to be had for those who trade the US afternoon. As you can see on the chart below price had run over 100 pips top to bottom and came up on not just the hourly and 4hr 200EMAs but the previous days low is just under also. Once it showed the trap there was a clean 40+ pips with a conservative entry. Of course I was in bed but if I did take this trade I would be out now since although we can trade level 3 both ways the higher probability trade is the reversal and 2-1 of my risk is a great profit.

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The GBP/USD is still chopping around in its 3rd level price action and has yet to break. having said that the reversal is the higher probability trade and with already having the stop run to the highs and lows yesterday they will most likely not let any longs see profit and the stop run today may not even get above the Asian highs. I will be waiting for a clear trap candle pattern before shorting this pair today.

We do have some decent news releases today with Flash Services and Manufacturing PMI numbers from France , Germany and the Eurozone as a whole. The ones I will be looking at are the German Mfg. Mainly because they are a export nation and manufacturing is key to exports. Also they are teetering at the 50 level of expansion/contraction. Any surprise below 50 will be Euro negative. Later in the day the Industrial new orders are released also and expected to be a 2.0% drop. If this surprises to above negative there will be a pop in the Euro but it will take a significant number above zero to change any negative sentiment that might be in the market from previous releases.

Other than that we do have Retail Sales from the UK and Unemployment claims from the US which could make things interesting for New York traders

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