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.
Can the fulcrum underpinning financial markets (Fed’s QE) perpetually underpin the exuberance in stock valuations, or will concerns over the disturbing rise in COVID-19 cases in the US finally tilt the balance in favor of sellers in a more protracted manner?
This question above is the main debate driving financial markets at present and one that through the technical analysis of the charts, I take aim to clarify on a daily basis based on the latest ebbs and flows in currencies, equities, metals, bonds, etc.
In the last 24h, the pendulum swung back and the sour mood was re-established, as depicted by the sharp fall in US stocks (S&P 500 -2.6%), following the spike of COVID-19 cases in California, at 7149 from 5019 yesterday. In Texas, hospitalizations increased by 7.3%. Florida also saw cases rose by 5.3% against the weekly average of 3.6%.
To make it worse, Europe is considering to block US travelers due to COVID-19. Be reminded, the markets didn’t find comfort in the news by Apple either, after the company announced it would close 7 stores in Houston amid the rising coronavirus spike. It follows the closure of stores in Arizona, Florida, North Carolina and South Carolina last week. The COVID-19 somber narrative is picking up indeed.
During my daily scouting of market intelligence, I also noticed a few remarks attributing the sell-off partly due to pension and mutual funds front running month and quarter-end re balancing flows. You never know the extend of the veracity (I assign it as low driver) but judging by the date in the month and with the sizeable gains in equities vs bond benchmarks, selling equities and buying of bonds appears warranted.
Besides, the announcement by the US to impose $3.1bn in EU tariffs in retaliation for Airbus subsidies, a spike in EIA oil inventories by 1.4m barrels v 0.3m expected shaking the conviction over the pace of the recovery, alongside an IMF downgrade in global growth, were all subsets of news that as a whole may have too impacted risk.
Shifting my focus into the charts, the deterioration in risk conditions has left some technical scars in the S&P 500 as our Go-To risk bellwether by breaking its prior swing low but not yet making it outside its week-long range as we need clearance of the June 22 swing low. The fact that the push down has found considerable absorption validates my view of applying patience. The target on follow-through supply below 3,035.00, which represents a 100% symmetrical target off the bracketed range, is 2,920.00.
Next market to comment on includes Gold, where sellers managed to muster enough momentum to re-take the downside of the 13wma off the 4-hour time scale. However, since such setback still occurs in an unambiguously bullish context with structure and momentum in agreement across the aforementioned time frame and the daily, the outlook for Gold remains bright. Besides, the pullback has rejected a prior role reversal level and bullish divergence in the gold index exist.
In the currency space, the unwinding of leveraged bets in equities has led to the out-performance of the US Dollar this time, recouping some of its lost ground from earlier on the week. It appears as though we are going through a classic capital repatriation back to the USD. The Swiss Franc also showed fortitude as did the Euro and the Yen in this order. The Oceanic currencies and the Pound were the weakest links, with the Kiwi under selling pressure since the RBNZ policy meeting in Asia.
My main take away after scanning through the currency charts is the rather choppy state that most currency pairs trade under. It’s hard to find markets where the 4-hour, let alone the daily, are trending with well-defined one-sided flows. There are some that as of late appear to imply a more protracted trend may be upon us, but we really need to see further conviction in these movements. I will provide all the details, as usual, by elaborating on my views through the video format below.
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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