The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.
The Daily Edge is authored by Ivan Delgado, Market Insights Commentator at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth look of market dynamics, factoring in fundamentals, technicals, inter-market in order to determine daily biases and assist one’s decisions on a regular basis. Feel free to follow Ivan on Twitter & Youtube.
The only pieces of news that managed to spice things up in the forex arena ahead of today’s US NFP report, came courtesy of Brexit and the ongoing trade negotiations between the US and China. The Sterling ended as the weakest currency on Thursday, even if the UK parliament has effectively passed a bill that blocks a no deal Brexit outcome by the narrowest of margins (312-311). The irony is that it won’t really depend on the UK to dictate if a no-deal doesn’t happen, as the last say is by the EU. Rumors have it that the EU and the UK are mulling a 9-month extension, to be discussed and potentially agreed upon during next Wednesday’s Summit. Meanwhile, there are no signs that the current talks between the govement and the labour party will yield fruits ahead of next week’s Summit, which is apparently to be blamed for the deterioration in the Sterling sentiment. As per the Sino-US trade talks, the latest we’ve heard in the Asian hours of Friday, via Chinese state media Xinhua, is that President Xi has expressed optimism amid the substantial progress on trade, citing a message of the Chinese President sent to Trump. The headlines have spurred a fresh wave of buying into risky assets, with the AUD the most benefited. Earlier on Thursday, Trump said the trade deal could be announced in about 4 to 6 weeks. As a cautionary note, US trade representatives have reiterated that there are still some major issues left in the table. As a reminder, China’s Vice Premier Liu met with US President Trump in the White House during the course of Thursday.
As the granular tendencies (applies a 5-period moving average) in the hourly illustrate, the latest headlines by Chinese state media Xinhua got picked up by algos and fast money during the Asian hours, with pro ‘risk on’ flows looking to squeeze weak-handed players in a move that shows all the signs of a ‘true risk on’ transition. The spike in the S&P 500, the US 30-year bond yields, combined with the selling of Yens, is the proof in the pudding. The USD continues to find strong pockets of demand even as risk flourish. This could be partly explained due to the ongoing low volatility regime in G10 FX, which encourages carry trade positions as the pre-conditions of risk appetite on a low vol environment becomes music to the ears of investors. Since the USD is effectively one of the highest yielding currencies, market participants are tempted to borrow in low yielding currencies also referred to as funding currencies such as EUR, JPY to buy USD.