After the Asian session finished down more than 200 points, stocks have traded negatively, as has Europe amid poor bank earnings results, giving investors more reasons to worry about the economic future. All of this is despite the confidence we witnessed during recent days, mainly because traders know the worst is not over yet and the banks suffering is likely to continue.

The EUR/USD has managed to find support at important 1.2860 for now, managing to trade a bit higher today after better than expected German ZEW data. However, the euro is still weak and its brief rally towards 1.30 was not enough to break its current resistance level. Trichet and his ECB monetary outlook is making traders wary and until we have a clear sign something will be done during the next meeting, the euro bulls won€™t commit to further buys!The range for now is 1.2830-1.3030 and only a clear break of these levels will give us a new direction.

The GBP/USD has managed to hold at 1.45 and although we saw a brief move below towards 1.4460, the downside didn€™t last, as better than expected CPI data gave the pound a temporary boost. The pair has a long way to go before we can say it is ready to break higher, where only a clear break of 1.4630 could give us more upside.

Aside from the ZEW, the economic calendar only featured the UK CPI and RPI, neither of which were as bad as forecasted. Traders tend not to take the economic releases as seriously as before, instead moving on sentiment and feeling about the future moves of the central banks. For example, yesterday we saw the pound plunge against the dollar and euro, mainly because of how traders felt about the annual budget release announced tomorrow, with speculators already expecting the worst. The same thing happens with the euro, as traders fear for further split within the ECB about the future of the interest rates, therefore they sell the euro at any given chance!

At times like this, where fear and uncertainty drive market participants, risk aversion returns, just as we saw in futures and equities over the last few days. A rally in stocks cannot hold for long, purely because traders do not trust the current levels for going long! The gold also rose today due to the falling stocks, as traders look for alternative assets when confidence in futures is low.

Let€™s see how New York will progress and if the current negative sentiment will give us more downside, plus how the GBP/USD behaves above 1.4630 and if the pair finds a temporary bottom at 1.45.