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.
Traders had to digest a plethora of negative news such as absolutely catastrophic global flash PMIs across Europe and the US, another spike in the US jobless claims above the 4 million mark which tells us the US unemployment is running near 20%, or the fact that Europe is yet to agree on how it will fund its covid-19 long-term recovery plan.
Be aware that the market is so far treating these dismal fundamentals as ‘old news’ and I see no reason why it would be any different on Friday, when we get the UK retail sales, the German IFO and US goods orders. As I mentioned in yesterday’s report, these fundamental reads “will probably be sit out given how much negativity has already been priced in. Everyone should ‘guess’ that the data, now capturing the effects of COVID-19, is going to be simply appalling.”
Despite the above, we saw suppressed volatility in US equities, with the S&P 500 (-0.05%) still trading within its 4-hour range. The continuation of the oil rebound was one of the few silver linings that one could argue contributed to the stabilization of risk sentiment. One that commodity-linked currencies (AUD, NZD, CAD), this time, managed to capitalize on in style by outperforming its peers.
By the way, do you wonder what caused the sudden intraday spike in the Yen or Euro crosses? In the former, it had to do with a Nikkei report that the BoJ may allow unlimited government bond purchases, while maintaining the yield curve target. The report also notes that the BoJ will double the purchase targets for commercial paper and corporate bonds, suppressing those yields. A similar flash spike was seen in the Euro as result of a Bloomberg headline attributed to Merkel where she endorsed that leaders’ virus response “must be huge.”‘
Something else worth pointing out is the latest data published by the Swiss National Bank, where it confirmed record losses of CHF38.2b as a results of its active intervention on its stock portfolio. Remember the SNB has been manipulating its CHF exchange rate to try to prevent further appreciation of the CHF against the EUR. This is all you need to know to understand why EUR/CHF has been a yawnfest and therefore the EUR and CHF are moving in lockstep as of late.
Another piece of news that got some air time is the failure of the first Chinese trial, as reported by the Financial Times, of the drug remdesivir, developed by Gilead Sciences, which showed not marked improvements in the patient’s condition. This developments contradicts previously released information that opened up a venue of hope about the effectiveness of the anti-viral drug.
Shifting gears now, let’s look at the currency market, where the EUR was the weakest link, manifesting lower levels across the G8 FX complex, in what may reflect some disappointment over the deep disagreements of the EU as they pertain to the long-term rescue fund.
It may have also had something to do with the bold statement by France President Macro, who said via Reuters “Europe has no future if we cannot find a response to this exceptional shock”, or even ECB Lagarde warning of the -15% contraction in GDP overnight.
EUR/USD looks technically very weak, even if this weakness is solely an expression of EUR weakness and not fueled by USD strength, which makes me wary and hence I call this trend not the healthiest. The EUR/USD, unfortunately for those seeking out well defined 4h/daily biases, is the only major that has cleared up the technical picture, even if that must be reconciled with the troubling fact that is being pushed down not as a result of USD strength.
The rest of majors analyzed in today’s video (GBPUSD, AUDUSD, USDJPY) are all, without exception, stuck in ranges, with the Aussie the one that may soon see a resolution of its topside edge amid a startling recovery. Granted, if we expand the focus outside these majors, there are definetely some juicy trends developing in markets involving the Euro, Swissy or even Pound against the strongest in FX. A market that I also touch on as part of today’s technical analysis which has made a strong bullish declaration of intent is Gold.
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This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter a position. This analysis 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