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Currencies consolidate vaccine-led rallies

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The British Pound made a statement of fortitude through Tuesday, ascending to the top of the leader board. The price of Gold was the only asset I monitor in my daily analysis able to keep up. The rest of currencies meandered without a discernable bias as the market appeared to consolidate the strong gains after the vigorous risk appetite wave following the positive vaccine news by Pfizer. 

Let’s get started…

Scan of the markets

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 FX basket. 

The British Pound made a statement of fortitude on Tuesday, ascending to the top of the leaderboard. The price of Gold was the only asset I monitor in my daily analysis that was able to keep up. The rest of currencies meandered without a discernible bias as the market appeared to consolidate the strong gains on the back of the vigorous risk appetite wave in response to the positive vaccine news by Pfizer.

Macro risk appetite

In yesterday’s article, I argued that Pfizer type news can have serious repercussions on market trading psychology. The moment the market buys into the notion that the real solution is here, could be that inflection point. 

The moment Pfizer shared the news with the world the other day, the market has shown a strong interest to bid up risky assets (AUD, NZD, CAD) and sell-off the ones considered the safest, such as Bonds, Gold, JPY, CHF. Besides, the outflows in the tech Nasdaq is another ‘telling’ sign of such a notion.

By announcing the news, Pfizer created a macro narrative which made the market gain confidence. And likely impacted global growth in 2021. The news that Pfizer announced, and most importantly, how the market reacted, resonates with my concept – the news created an environment with risk-friendly conditions.

G8 Forex indices – performance 

There is no way around what price action portrays via the FX indices. It is the ultimate indicator of where we are at. Analysing the graph above, we can clearly identify a distinctive difference in performance.

On one hand, we have the currencies associated to risk-off conditions such as the USD, JPY, CHF, all firmly bearish as per the momentum measured via the SMT (Smart Money Tracker) indicator. Besides, the order flow has been decisively bearish as the OFA script depicts.

On the other hand, the AUD, NZD, GBP are the 3 currencies reigning in the Forex market at the moment. The CAD follows at a fair distance behind, while the EUR keeps treading water at an index level, even if the preponderance of technical evidence is overall bearish.

Hot trade of the day

To see an expanded version, right-click and select ‘open link in new tab‘. In this section, I pick a market or several ones that presented an opportunity to buy on weakness or sell on strength, based on the higher timeframes outlook. My video analysis below, elaborates further on the logic behind the trade.   

In this video analysis I dissect the hot trade of the day. A fully-fledged trading course, including lessons on how to trade this pattern, will soon be available via Global Prime Trading Academy website. While the video is intended as educational and not financial advice, it portrays the power of trading the pattern the right way.

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Recent economic indicators & events ahead

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 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. Watch this video where 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.