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Back and forth in risk profile dynamics

The optimism around the Moderna-led vaccine news has faded quite rapidly in the marketplace. The market is behaving more defensively once again judging by the performance of certain currencies such as the Japanese Yen or the Swiss Franc. This behavior may be due to the market placing back the focus on the continuous resurgence of coronavirus cases, hospitalizations and deaths one may argue. 

Let’s get started…

Performance of Forex indices

To see an expanded version, right-click and select ‘open link in new tab’. The indices show the performance of a currency vs a G8 forex basket. Indicators are available to use these measures via Tradingview and MT4.

 

The optimism around the Moderna-led vaccine news has rapidly faded. The market started to behave more defensively judging by the performance of the Japanese Yen and the Swiss Franc. One may argue, that this behaviour may be due to the market focusing on the continuous resurgence of coronavirus cases, hospitalisations and deaths.

The concern is the Japanese Yen index topping the leaderboard for the day. That’s precisely what happened on Tuesday this week. This in mind, we should be expecting more vaccine headlines with “imminent” Oxford/AstraZeneca results. If recent history is any indication, the market tends to see a spike if the results are positive.

The British Pound also had a field day with buyers taking control on UK-EU trade hopes. As reports insinuated, both countries are finally in “landing zones” for a potential deal in the short-term. In fact, the Pound was the best performing currency in the last London session. On the contrary, the Aussie and the Canadian Dollar, were both suppressed by ending at the bottom of the performance table during the London session, as well as the total net losses for the day.

Trading via Forex indices

To see an expanded version, right-click and select ‘open link in new tab’. In this section, I provide insights into intraday currency trades via the G8 forex indices. The aim is to match the weakest vs the strongest. I apply the SMT indicator to measure multi-timeframe momentum alongside additional metrics. Due to popular demand, I am working on an extension of my course to add this strategy.

 

At the open of the New York session, we had a phenomenal opportunity to short the AUD/JPY. This sell-side exposure in the Aussie against one of the strongest currencies for the day (as was the case of the Yen) was well spotted via the G8 Forex indices template.

To sum up, we had the SMT lining up outright bullish in the combination of 5m, 15m, 1h, 4h in the Yen, while the opposite was true when looking at the Aussie. When such contextual setting occurs, we know that this is a market that offers a potential solid trend, as I am matching the strongest vs the weakest currencies.

The next logical step was to shift to the 5pm currency pair with the strikingly bearish prospects. Knowing that the position was entered at a time when both, the JPY and AUD indices, had a sudden momentum change to the bullish and bearish side respectively, was the sign to pull the trigger.

Trading via trap patterns

To see an expanded version, right-click and select ‘open link in new tab’. The table above shows key metrics (momentum + structures) in different timeframes (4 hours and daily) to assist students of my TT course in selecting the best trending markets (link to the script). A video on the power of the SMT can be found here “How To Trade Forex Trends Like A Pro”. The video “Fractals + SMT Upgrade: The Multi-timeframe Functionality” is also a Must-Watch to fully grasp this style. A fully-fledged trading course about the TT (Trapped Traders) pattern will soon be available via Global Prime Trading Academy website.

 

The failure to see further continuation of the ‘risk on’ moves has shaded the prospects for trending markets. Nonetheless, more than 10 currency pairs were still flashing full bullish or bearish alignment as per the measures of structure (via the FT) and the momentum (via the SMT).

There are still a bunch of USD-centric markets the likes of the GBP/USD, AUD/USD, NZD/USD, USD/CHF where these congruences in the directional biases through the analysis of the 4 hour and the daily timeframes still exist. As a result, these pairs still have my attention to be mostly looking for longs (shorts on USD/CHF).

 

Hot trade of the day

In this section, I pick a market or several ones that either presented an opportunity based on the concepts I teach or alternatively I may also use this section to provide lessons. My video analysis below elaborates on the logic behind the trade.   

Economic indicators & events

Important footnotes

Market structure 

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 this video. Fractal breakouts is at the epicenter to assist us in the analysis of chart structures.

Market momentum

In order to assess the market momentum of a particular asset, I’ve promoted the idea of using what I call the smart money tracker. The settings and the indicator can be accessed via our Discord room, where traders from all walks of life interact frequently. In this video, I go through the layout and all elements of the Discord room in great detail.

Projection targets 

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.

 

About the author

Ivan Delgado

Ivan Delgado is a decade-long Forex Trader. Feel free to follow Ivan on Youtube. Join thousands of traders who follow Ivan's insights to increase their profitability rate by learning the ins and outs of how to read and trade financial markets. Ivan has you covered with in-depth technical market analysis to help you turn the corner.