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Understanding Overnight Currency charts

How to read the chart?

The chart shows the change of the price of a day, starting from the price of 22:00 UTC (The daylight-saving time period in the US is 21:00 UTC) when the New York market closes. The higher a line (currency) goes the more currency would be bought and the lower shows it has been sold. The strength is relative, so the sum total of the currencies value would always be zero at any time.

How to use the chart?

1) Quick snapshot of what happened overnight

2) Use it with options tool to see if anything is outside the parameters of what option market is looking for

3) Possible Sentiment gauge (are we entering risk off/on)

  1. Quick snapshot of what happened overnight

This is the most obvious use for the chart and is its intended use. If you missed a headline from overnight but you can see that AUD and NZD are being sold then you know something must be amist in China and then seek out those headlines.

2) Use it with options tool

This probably needs it own post, but if the options market is pricing in 50 pip moves in the EURUSD and the Euro has moved 100 pips then 9 out of 10 times the Euro is going to correct in Europe. Asia is the quietest Fx session and least liquid. There is an options tool at the bottom of our blog

Understanding Overnight currency moves

3) Possible sentiment gauge

Self explanatory - if we see risk on currencies being sold and risk off being bid then we know where sentiment overnight has been and the risk is that it spills over to European and US sessions.

In conclusion this is merely another tool for the probabilistic minded trader.

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