Forex Top 3 Chart Setups: Trichet and Inflation

Mark Whistler is the founder of www.WallStreetRockStar.com and is the author of multiple books on trading. Mark's newest book, The Swing Trader's Bible - co-authored with CNBC/Fox News regular guest Matt McCall - will be on shelves in late summer, 2008. In addition, Mark also writes regularly for TraderDaily.com and Investopedia.com.

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Top Chart Setup #1: EUR/USD on Ascending Support

Looking at an HOURLY chart of the EUR/USD, we see that bulls had another overnight run at the pair, just after 2:00 AM, when German International Trade showed April imports declining 1.2%, and exports increasing 1.2%. Shortly after, the EUR/USD put in a new high in the relative range at 1.5843. However, with 4-hour and 2-hour charts painfully overbought, buyers weren't able to push any further breakout levels. Then, early Monday morning, the pair retreated into the 1.5790 to 1.5800 area, and ascending support shown on the below hourly chart.

Jean-Claude Trichet speaks in Paris on Monday at 12:30 PM EST; if his comments contain the same hawkish tone that the ECB head honcho unveiled last week, the euro could find higher ground. Conversely, a change in theme could take some of the hot air out of the euro's recent rally.

Top Chart Setup #2: Pound at Resistance

Taking a look at a daily chart of the GBP/USD, we see that the pound has started the week of June 9th with a bang. Overnight, UK's annual core producer prices showed the most significant signs of inflation, since 1991. May Producer Prices clipped 8.9%, exceeding the already sky-high 7.6% witnessed in April. The event triggered a massive rally in the GBP/USD, which is now sitting right at descending resistance.

The UK economy has already shown signs of slowing, thus many are not looking for a rate hike at this time. However, with inflation showing some extremely ugly signs, the BoE certainly has its hands tied and won't likely be able to cut rates any time soon, though up until the past week, or so, a quarter point trim was expected in December of 2008. Regardless, the GBP/USD is sitting at critical descending resistance, something traders will want to keep an eye on.

Top Chart Setup #3: EURO Right Back at All-Time Highs Against Yen

The monthly chart of the EUR/JPY is interesting, to say the least. We immediately notice that the euro has rebounded right back to all-time highs against the yen, with plenty of room to run on the upside - as noted in many momentum indicators. With Trichet's comments and sky-high oil prices still hurting the Japanese economy (witnessed directly in the Asian country's trade report), traders are clearly rotating money out of the yen and into the euro. The question now is whether the EUR/JPY will be able to break out above higher, or fail here, as it already has four other times since 2006. Regardless, to reiterate, should Trichet roll out more hawkish comments in Paris today, the EUR/JPY could find itself in breakout territory.