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.
Let’s get started…
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.
The overall risk sentiment, taking the temperature via the S&P 500, is one characterized, as per the last 24h, by a marked improvement as reflected by the failure of the bottom-side delimitation of the index daily range. The abrupt rejection off the lows in US equities resulted in a bullish engulfing candle and tentatively, places the focus back up.
As long as we don’t see a decisive breakout of the daily structure in the S&P 500, the currency market won’t enjoy the ideal backdrop to see long-lasting trend developing. Instead, the risk is that we will struggle to get out of 2nd gear with decisive impulse as the prospects of rotational markets fading late buyers/sellers settle in.
There is definitely going to be idiosyncratic aspects that will inflict some currencies an extra dose of vol as recently seen in the NZD post RBNZ or the pick up in GBP sales as talk builds up of QE expansion. However, by and large, unless the underlying risk sentiment shifts meaningfully, breakout traders in high timeframes will face tough times.
Fundamentally, before I jump into other markets. President Trump made headlines after publicly stating he has no interest in speaking with President Xi in a Fox news interview, certainly stepping up the rhetoric against China. Remember, Trump has been very vocal as of late blaming China for the global COVID-19 pandemic.
Now, let me make a point why the approach to interpret technicals over-rides any decisions purely based on fundamentals. This very same story on US-China tensions above is often utilized, always in hindsight, to fit certain narratives of price behavior. This is why I tend to almost never account for fundamentals as part of my decision-making process, other than to be aware of key releases to refine trade management.
Rest assured, if the equity market had sold off on the back of Trump’s interview, which carried a very sober outlook on the future relationship with China, we’d see plenty of headlines justifying the move lower in equities because of Trump as the culprit. Along the same lines, a weaker than expected US jobless claims on Thursday could have served the same purpose, but since it didn’t cause equities to stay sold, it is ditched and ignored.
Moving on. We’ve seen decisive buy-side pressure feeding through in Gold, taking the price to retest resistance at 1,735.00 in the context of a daily range. Gold enjoys an impeccable positive macro outlook as the US indebtedness goes through the roof amid unprecedented uncertainty. Price action will be the ultimate determiner but it looks as even in the front we are nearing another statement of bullish intents on a close above 1,735.00, which I’d expect will drive plenty of interest.
With further validation that equities are range-bounding from a daily standpoint, it is no wonder that we are seeing the failure of the JPY index to extend its spell of strength. It is also what disincentives that commodity-linked currencies break away from confined daily ranges against the more risk sensitive currencies (USD, JPY, EUR, CHF).
In the EUR/USD, as I dissect the DNA of this market, it is hardly inspiring for trend follower traders. Instead, one must contend with a more limiting structure to be exploited (range conditions), which means the best RR prospects come at the extremes. Right now, this pair is once again trying to carve out a bottom of the lower bound.
Be aware, with Germany projecting a bigger than expected decline in tax revenues on Thursday, it creates jitters as to whether or not the country’s willingness to contribute to the EU fiscal stimulus will be affected. If so, that would be an important idiosyncratic element that may see the EUR decouple negatively from its risk correlation.
The GBP/USD is one of the only markets, which given its peculiar behavior this week, where selling has come in earnest, and in light of the congruence found in structures and momentum off the daily and 4-hour charts, I still can envision the trend lower to prevail. The weakness in the GBP index, at a time of a USD recovery this week, has really pushed the envelope of what one may think is technically possible in a market that remains overall very rotational in nature.
The USD/JPY, as I look at the 4-hour chart, the existence of flashing buy signals are re-emerging again. The momentum and structure are back in alignment, which has also the backing off the daily timeframe. This sets up the stage for conditions to be ripe in order to jump onto the bullish bandwagon at discounts. Remember, a safeguard via a lower timeframe setup triggers is a needed insurance to confirm one’s bias.
I won’t spend much time analyzing the AUD/USD as the non-directional nature of this market remains the name of the game. With equities in the US finding buyers at the lows, the AUD saw renewed buy-side interest which takes me back to squaring my view to neutral. Be reminded, it is perfectly find not having conviction in a particular market, and that’s precisely my view now. I am sitting out trading it.
If you found this fundamental summary helpful, just click here to share it!
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