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Demand Explosion In Growth-Linked FX

This morning, as I open my charts, the first thing that strikes me is the strength of the antipode currencies and the Canadian Dollar, a group of currencies that are usually defined as commodity/growth-linked.

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.

 

This morning, as I open my charts, the first thing that strikes me is the strength of the antipode currencies and the Canadian Dollar, a group of currencies that are usually defined as commodity/growth-linked.

On the contrary, the US Dollar was without a doubt the currency that suffered the most the consequences of very suitable conditions for the redistribution of incoming capital into equities/commodities after Tuesday’s sell-off.

Allow me to open up brackets here. Why do we call it commodity/growth-linked you may be asking? Because these are currencies from economies which economic health is sensitive to changes in commodity prices. The ‘growth’ term must also be emphasized because when prospects for global growth become rosier, commodities tend to outperform.

Now, let me shift gears very briefly into economic news. There were three news making headlines that I will briefly touch on. Firstly, OPEC agreed to raise production by 75K bpd in Feb and March. Secondly, the grim news that in the UK they continue to hit record COVID-19 numbers with a total tally of 60,916 cases. Lastly, the ISM December manufacturing index came at 60.7 vs 56.7 expected.

Be reminded that at a fundamental level, despite monitoring news won’t move the needle in the identification of trading opportunities, it’s very useful to be in tune with the narratives that at times may be driving markets. As is well known, I do treat high-impact fundamental news with respect as some can temporarily ratchet up volatility, which has direct implications to time trade entries and adjust the management of some open positions.

So, back to today’s contextual setting, what does the explosion in demand towards commodity-linked FX mean? It implies a renewed set of potential ‘trapped traders’ trading opportunities might be in the offing as flow imbalances become more apparent. The beauty of this trading approach, taught via our academy website, is that through the analysis of any chart, one can quickly decipher via momentum and structures, where opportunities may reside.

Case in point, heading into Wednesday’s trading, we’ve transitioned from an absence of markets to trade to over 15 that now meet the contextual pre-conditions to be tradable via TT setups in line with the established trends. The selection of these markets (watch video) is simply a by-product of identifying the most acute flow imbalances through the analysis of chart structures, there is no other secret sauce, other than complete ownership of how to read them.

Forget about being bombarded with an endless slew of news, following so-called gurus, or anything else that may shadow your objective judgement. What’s important is that you stick to a set of strategies that you truly absorb, learn, interiorize and apply with consistency. Remember, we find ourselves in a suitable position to ramp up activity now.

Analysis of the Forex trends

In my video analysis below I use concepts such as momentum, market structures or order flow to come up with the daily outlook in the currency market.

Economic indicators & events

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.

 

Source: Forexfactory

Important footnotes

Announcing The Global Prime Academy. Check out our brand new Academy website launched earlier this week. Let me give you a brief background on why we’ve created the Global Prime Academy. The universal praise I received about my trading and content I produce has been incredible.

However, clients at Global Prime were frustrated to find a structured way to absorb all this knowledge. Part of these golden nuggets are now going to be encapsulated in easy to follow and digestible lessons. By the end of the course, you will be given a set of strategies to take your game to the very next level. The first delivery focuses on the ‘TRAPPED TRADERS PATTERN’ while the second course is about ‘CURRENCY STRENGTH MICRO-MECHANICS’

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.