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Forex Indices: The Daily Breakdown [01-14]

The North American currencies found strong buy-side flows since the last European session. The British Pound is still the bet performing currency over the last week though even if the structural resistance faced at an index level disallowed further progress. This hidden resistance, unless monitoring the GBP index, won't be noticeable!

Let’s get started…

Opportunities in the Forex indices (video below)

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.

 

The North American currencies (USD, CAD) found strong buy-side flows since the last European session. The British Pound is still the best performing currency over the last week though, even if the structural resistance faced at an index level disallowed further progress. This hidden resistance, unless monitoring the GBP index, won’t be noticeable! Meanwhile, the two currencies most punished remain the Euro and the New Zealand Dollar. Holding short-side JPY exposure has not paid off despite the buoyant behavior of global stocks. AUD and CHF are in wait-and-see mode.

In my video analysis below I use concepts taught in the brand new Academy website such as momentum, volatility measures and market structures to come up with the daily outlook in the currency market.

EUR INDEX

The single currency remains outright bearish. To put things into perspective, the Euro has been sold in 9 out of the last 10 sessions. The losses have accelerated the moment that a sticky area of support was cleared. Remember that these equally-weighted FX indices studied are a formidable tool to evaluate the technical merits that a particular currency enjoys to appreciate or depreciate in different time horizons. By breaking through the support the chart above exhibits, the odds were stacked in favor of a sell-side continuation. The next clear target is the 100% measured move.

GBP INDEX

The Sterling saw further buy-side flows in early London only to peter out such exuberant momentum by the time the North American flows made their way in. If you hung onto gains in the Pound, the smart move would have been to start dialing down the exposure at the macro structural resistance so neatly represented through the purple area. If we can historically document, as we in fact do, that the Sterling has been struggling so respectively around this area, and in light of such an overextension from the previous balance area (over 1.3% appreciation), the chances are that considerable profit taking will be seen.  The overall stance is still bullish nonetheless.

USD INDEX

The USD, after briefly sitting at a key area of support, a strong wave of demand kicked in through the London session, which is not surprising given the significance of this area. As stated during yesterday’s report, “I can’t help but anticipate near term buy-side flows; hence, anyone looking to short the USD into this area is asking for trouble.” Fast forward, the US Dollar has now regained its central ‘mean’ line and it looks ready to keep auctioning higher.

CAD INDEX

I am running long exposure in the CAD following a commanding bullish outside bar reversal through the London session. Such sudden gyration led the CAD to re-take the control ‘mean’ line. The index has now cleared its 2021 peak, which leads me to believe that the outlook has now strengthened. In other words, the currency finds itself in an excellent technical context for further follow through to the tune of 0.2% appreciation from the last US close candle. Why this % movement you may be asking? That would structurally coincide with a strong SR flip from last December.

JPY INDEX

The sell-side bias in the Japanese Yen no longer is justifiable after 2 days of stagnation. The grey vertical line above exhibits the entry level. As one can notice, we never got out of second gear. The moment the trigger line in the bottom window turned bullish, that was the time to bail out of the position. I am sitting out any exposure for the time being as even if the Yen has regained its control ‘mean’ line, the majority of metrics stay bearish, which suggest that any upside momentum is lacking the technical backing I’d like to see when we cross this vicinity.

AUD INDEX

If you follow me along, you received my warning to stay clear of AUD long exposure heading into Wednesday as we were trading straight into the top-side of a validated range. Long and behold, buyers have temporarily dissipated as the currency struggles to break past this resistance. Given the strong uptrend in the AUD, I can picture buyers having another go to the upside, and if this starts to happen in the coming 24h, the risk of a breakout will keep increasing.

NZD INDEX

The strong demand in the NZD failed to find follow up as a strong supply emerged in the last London session. While no entry signal has been fired, the short-term bias has shifted to the downside even if I fail to anticipate how holding shorts can get you into ‘home-run’ trades. The bullish macro trend is very strong and not far below the NZD faces major support. Overall, I am patiently sitting this one out until a long signal pops up.

CHF INDEX

After clearing a huge area of support, the initial backside retest of that area led to a resumption of the downtrend. However, the lack of further sell-side follow-through has resulted in the establishment of a range. This nullifies any opportunities to get engaged in CHF exposure even if the overall bias is still quite bearish as per the all-red metrics we obtain via the SMT and the trigger line indicators. Bulls need to retake the magenta area overhead to regain the upper-hand.

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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.