EURJPY inside – pin bar, 19th January 2011

Forex Commentary:

The euro hit an eight-week high above $1.35 on Wednesday, boosted by increased confidence in Europe’s ability to defuse its debt crisis, however, the EURUSD did close below $1.3500 and it will need to climb back above it to extend the recent rally.

After hitting an eight-week high of $1.3538 overnight, the euro retreated to $1.3466 by afternoon in New York, still up 0.7 percent.

China has said it wants to move away from a global system dominated by the dollar. If it were to let the yuan to rise more rapidly against the U.S. currency, it would not need to buy as many U.S. Treasuries, which could put upward pressure on U.S. yields. China is the largest foreign U.S. creditor.

Trading Setups / Chart in Focus:

EURJPY

The EURJPY formed an inside / pin bar setup today, just below the significant horizontal area around 111.00 – 111.50.

Momentum has been bullish recently in the EURJPY, but if this inside / pin setup can break to the downside; we may see a deeper rotation back down towards support near 109.50 and possibly beyond that to 108.50. It is worth noting that this setup is against the recent bullish daily momentum, however, it does have the weight of the bearish weekly trend behind it.

EURUSD

The EURUSD recent 4hr pin bar setups that we discussed in recent commentaries have not fared too well against the recent bullish momentum, even though they were well-formed and at strong horizontal resistance. Not all setups work out, it’s just part of trading, it is worth noting these setups were counter-trend and I typically advise traders to trade with the dominant momentum, especially when starting out.

Also, the first pin bar you easily could have gotten your stop to breakeven before it stopped you out, and the second one would likely not have been entered because the low never broke.

For a more in-depth analysis of the major forex currency pairs and price action analysis, please check out my price action forex trading course.

Other Markets:

On Wall Street today the S&P 500 experienced its worst loss in nearly two months as disappointing results from Goldman Sachs and Wells Fargo put a cap on the recent rally.

The Nasdaq lost more than 1 percent, its biggest daily percentage loss since last November, as disappointing earnings came in from chipmaker Cree Inc, with its stock losing 14.5 percent.

The Dow dropped 12.64 points, or 0.11 percent, the S&P 500 lost 13.10 points, or 1.01 percent, and the Nasdaq lost 40.49 points, or 1.46 percent.

Upcoming important economic announcements: 1/20/2011

8:30am EST: United States – Unemployment Claims
10:00am EST: United States – Existing Home Sales
10:00am EST: United States – Philly Fed Manufacturing Index
12:00pm EST: Switzerland – SNB Chairman Hildebrand Speaks
4:45pm EST: New Zealand – Retail Sales m/m