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Commodity-linked currencies main movers

With volatility dramatically compressed in the last week, finding opportunities to trade in the Forex market has not been an easy task. Trading these tough conditions has been, first and foremost, an exercise of patience and sticking to one's plan of engagement. Even if so, a fair number of trades were simply not getting out of second gear.

Let’s get started…

Scan of the Forex market

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.

 

With volatility dramatically compressed in the last week, finding opportunities to trade in the Forex market has not been an easy task. Trading these tough conditions has been, first and foremost, an exercise of patience and sticking to one’s plan of engagement. Even if so, a fair number of trades were simply not getting out of second gear.

That said, with the right amount of concentration, and the right amount of tools in one’s trading arsenal, there is almost always a new setup around the corner. Last Friday was not an exception. While trading through the US session and using my proprietary trap pattern setup, there was a definite opportunity to short the Canadian Dollar. 

CAD SHORT EXPOSURE

The setup in the Canadian Dollar was best matched against the resurgence in US Dollar bids. Fundamentally, the long USD/CAD trade, was a typical purge of sellers’ accounts, only for these to be faded, and the market revert aggressively in the opposite direction. What’s more, the long trade was part of a rather counter-intuitive contextual setting, as it happened on the back of an upbeat Canadian retail sales report. However, new harsh lock-down measures in Toronto (Canada) eventually led to the reversal in the currency.

By stepping back to capture the overall performance from last Friday, the Oceanic currencies registered the most imbalances of flows. Long setups could have been found for momentum-type accounts in favour of both the Aussie and the Kiwi amid firmer risk conditions. However, by the time the London fix was over and liquidity shot to pieces, as it’s typically the case, the intraday rallies began to fade.

GLOBAL PMIS IN FOCUS

Heading into this Monday’s London session, we should see a decent pick up in trading activity, especially in the European currencies. The catalysts to expect solid liquidity conditions can be found in the events due in the economic calendar. There are a number of global PMIs to be released. First, in the European Union and the United Kingdom, then in the United Stated. These figures will be key to watch in order to gauge how activity is holding up given the renewed spikes in the virus news and the subsequent re-imposition of restrictions.

Hot trade of the day

In this section, I pick a market or several ones that presented an opportunity based on the concepts I teach. My video analysis below elaborates on the logic behind the trade.

Economic indicators & events

Source: Forexfactory. 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. The indicator allows you to save time and avoid mistakes.

 

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.

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