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.
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The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.
Looking back to the last 24h, it was a rather convoluted affair during the Asian session, with a brief period of high volatility amid the scare over the termination of the US-China trade deal. In Europe, the risk sentiment mood was given a fresh jolt as EU PMIs beat expectations, fueling further selling in the Greenback, while in the US, we got off to a solid start but as the session rolled through the trends petered out.
To put readers into perspective, Asia was characterized by an utter state of perplexity following a controversial headline by US Trade Representative Navarro who stated via a Fox News interview that the ‘US trade deal with China is over’, only to walk back the comments via the Wall Street Journal minutes after. Markets went through some wild fluctuations but with no net effect after all said and done.
What really sparked risk sentiment in a more long-lasting fashion from early Europe all the way to mid way through the US morning included the raft of positive European PMIs, building up the notion that we may be in the midst of a sharp recovery in activity. The fact that Trump came forward via a tweet to clarify that the US-China trade deal phase one is fully ‘intact’ also assisted the favorable risk dynamics.
The market also interpreted positively and clung into the chatter that the US is gearing up for yet another stimulus package by July. On a more negative note, we learned that COVID-19 cases in the US keep climbing at a steady pace in those identified hit spots such as Texas, Florida and Arizona. US health expert Fauci told lawmakers the US is going through a “disturbing surge” in new cases.
But with the US election in November and the catastrophic consequences the lockdown has had for the economy, the bar to re-establish restrictions is pretty high.
However, things can change in a dime, both in terms of a renewed spikes in COVID19, and this may lead to a tougher stance by politicians. A taste of that came via Texas’ Governor on Monday who said “if we were to experience another doubling of those numbers over the next month, tougher actions will be required”. Germany is a clear example of the tail risk, as restrictions were re-imposed in two districts.
As the chart above shows, even if US traders came online with a solid positive lead from Europe, the S&P 500 failed to break outside of its week-long narrow range. That inability to extend gains in US equities failed to justify further follow-through continuation in the AUD and NZD, the two currencies, alongside the Euro, delivering the best results for the day. Surprisingly, the CAD, succumbed as the worst performer, followed by the USD.
A whole different story involves the Nasdaq 100, where a new all-time high was printed, as many traditional value-led investors continue to watch the price action in disbelief. There is growing chatter that equities in the US are starting to be in bubble territory.
A Real Vision video analysis caught my attention, where Refinitiv looked at how the nature of the equity market has changed between the highs of February and the highs that are being made in the Nasdaq today, noting that “one of the key elements of a bubble that was missing earlier in the year is no longer missing today.”
A special mention once again deserves the price of Gold, finding consistent buy-side flows amid the technical breakout of its protracted daily range, while also benefiting from the USD weakness. I also observe a conducive environment to keep bidding up EUR/USD, AUD/USD or sell-side action in USD/CHF or USD/JPY. A much more detailed elaboration of my thinking process in the video below.
Heading into Wednesday, the NZD will attract above average interest as we get the RBNZ policy decision. The consensus is that both rates and guidance – see rates unchanged until March 2021 – wont’t be altered. The team at Bank of New Zealand notes that “the RBNZ will likely want to wait for August’s pre-election fiscal update to get a sense of government finances and likely stimulus measures before thinking of expanding its QE program.” We will also get the BoJ Minutes, the German IFO and a line up of Fed speakers today.
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This analysis is conducted on a multi timeframe dimension. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter a position, hence the video is mainly intended as a way to educate traders in upping their analytical skills.
If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!
Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.
In order to assess the market momentum of a particular asset, I’ve promoted for years the idea of using what I call the smart money tracker. The settings and the indicator can be obtained via our Discord room, where traders from all walks of life interact frequently. In this video I lay out the elements I look into to call trend directions.
Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.
It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.
The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection