Follow Through In Risk Appetite
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Follow Through In Risk Appetite

Authored by 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.

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. 

We’ve had follow-through ‘risk on’ flows as portrayed by the continuous rise in US equity indices alongside the outperformance of the Australian and the Canadian Dollar as Trump keeps the hopes for a fiscal stimulus deal alive. Mr. Market appears to behave as if sooner or later this deal will be struck by giving the benefit of the doubt.

Republicans and Democrats are back to the negotiating table for a broad fiscal stimulus plan after House Speaker Pelosi made it clear that Democrats will refuse stand-alone bills to aid airlines and other sectors of the economy. With Trump well behind on the polls, this appears to have re-ignited his interest to get a deal done, contradicting himself after stating that talks were canceled until after the election. Pelosi said she drew the “inference” that the Treasury secretary Mnuchin was interested in broader stimulus talks and hence further talks are now expected on Thursday.  President Trump added fuel to the fire by noting that talks on a stimulus plan are “starting to work out.”

On Thursday, the ECB minutes were also released, further reinforcing the notion of the dovish rhetoric by ECB members. The Minuets highlighted the Council’s concerns of protracted weakness in inflation, which has only been exacerbated from a stronger Euro as well as the slow down in business activity given the pick up in COVID-19 cases. It’s interesting to see the ECB is starting to show further concerns over the EUR valuations, noting “the pace of the euro’s appreciation, rather than the level of the exchange rate, that could become a concern”.

One of the currencies lagging way behind other risk friendly fiats includes the New Zealand Dollar following recent dovish remarks by the RBNZ, in particular from the Assistant Governor Christian Hawkesby and Chief Economist Yuong Ha at a media briefing. The market appears to now be repricing negative interest rates in New Zealand for the first quarter of next year. Hawkesby stressed that inflation and employment are going to remain depressed well below the initial targets over the next three years, which indicates “a very clear signal in terms of our dual mandate to be providing stimulus.”

It is precisely this sluggish behavior in the Kiwi that I was able to capitalize on in the past 24h as the market initially delivered bullish prices through the Asian and European session only to trigger a ‘trapped traders’ pattern in line with the strategy I’ll soon teach for a 3:1 risk reward. One can see below the messages I exchanged with our Discord user Terry, who’s fast become, ahead of the launching of my trading course, a committed apprentice in trading the ‘trapped traders’ pattern.

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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 will further elaborate on the logic behind the trade.   

Insights – Hot Trade Of The Day

In this video analysis I dissect the information above. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter and manage a position, hence the video is intended as educational in nature and not financial advice. 

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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 I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!

Important Footnotes

MARKET STRUCTURES

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. In this video I lay out the elements I look into to call trend directions.

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