Forex Market In Need To Break Ranges
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Forex Market In Need To Break Ranges

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.

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Scan Of The Markets

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.

It’s been a complete snooze-fest in financial markets with tight contractions in currencies the predominant dynamics in observance of the Memorial day and other domestic festivities around the globe. In the grand scheme of things, equities keep pressing higher as depicted by the new trend highs recorded by the S&P 500 futures, which keeps suppressing the outlook for currency as risk-sensitive as the Yen.

In today’s video analysis, I note that the FX market is set to ramp up its depressed levels of vol as normalcy in order flow returns. The first sign that opportunities will be coming back is the resolution of the current tight consolidations. GBP/USD and AUD/USD, shorts and longs respectively, show potential to resume the dominant trends, while the picture gets murkier when analyzing the EUR/USD or USD/JPY.

In the fundamental front, one must keep an eye on the unfolding situation out of Hong Kong when trading the AUD and other associated risk assets (NZD, CAD, equities). People have taken the streets again with defiance against social distancing. This is in response to the plans by China to introduce a new national security law in Hong Kong within 6 months or ever sooner than that, set to strip away most of the autonomy and liberties that the region enjoys.

According to Global Times, “the proposed legislation entitles the central government’s national security organs to establish agencies in the SAR to safeguard national security, while the chief executive of the Hong Kong SAR government will report to the central government at regular intervals. The reports will include performance of duties in maintaining national security, conducting national security promotion education, and prohibiting acts that endanger national security.”

US Secretary of State Mike Pompeo defines the violation of rights by China a “death knell” for the city’s freedoms. “The United States strongly urges Beijing to reconsider its disastrous proposal, abide by its international obligations, and respect Hong Kong’s high degree of autonomy, democratic institutions, and civil liberties,” Pompeo said in a statement on Friday.  The plot thickens in this new cold war.

Another fundamental driver with merit on its own right to stimulate flows in the Euro comes via the ECB’s hint that it stands ready to add further easing measures in June. In the minutes of the April 30 (virtual) ECB meeting published on Friday, members noted that “the Council would have to stand ready to adjust the Pandemic Emergency Purchase Program and potentially other instruments if it saw that the scale of the stimulus was falling short of what was needed.”

In the UK, an idiosyncratic element with the potential to exert further pressure on the Pound is the multiple number of admissions by BoE members that negative rates are on the table. The last strong hint came via BoE Deputy Governor Dave Ramsden who told Reuters it was “perfectly reasonable to have an open mind” about negative rates. If we shift the focus to Sterling’s technicals, there is full congruence between the negative fundamental headlines and where we stand in terms of technicals.

Remember, a tail risk that remains hovering on the background but could hit risk sentiment any time has to do with second COVID waves as the re-openings of global economies continue. In Europe, things have quieted down with Italy and Spain reporting fewer than 100 cases, while in the US is not as encouraging with over 100k deaths. Reuters also reported on Monday that 11 US states recorded a jump in the number of new COVID-19 cases, including Alabama, Arkansas, Minnesota, North Dakota, New Hampshire, Maryland, Maine, Nevada, Utah, Virginia and Wisconsin.

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Insights Into Market Flows

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.

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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 the tutorial How To Read Market Structures In Forex.

SMART MONEY TRACKER 

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.

SUPPORT & RESISTANCE

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.

FUNDAMENTALS

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.

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