Lower USD Near Term? Charts Tell Us So…
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Lower USD Near Term? Charts Tell Us So…

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.

The lay of the land in the Forex terrain is not looking encouraging for the USD outlook in my book. Amid overall buoyancy in equity valuations as the world rolls back containment measures, the backdrop for the world’s reserve currency looks negative near term.

Besides, the earnings season in the US has so far not had a major influence in stocks volatility. While the S&P 500 has given back Tuesday’s gains, it remains overall positive. Google came out with solid earnings per share (Netflix last week), even if Apple, Amazon and Facebook are still are still part of the ‘FAANG’ conglomerate to go.

By checking the chart above, do you notice the divergence in performance between the Australian Dollar and the rest of currencies? That’s how much momentum there is behind the currency, which has gone from the most punish during the COVID-19 distress times to the most loved as the risk sentiment keeps flourishing up.

In today’s video analysis, I make a case, based on symmetrical targets, that 0.6640 is the next AUD/USD target. Along the same lines, if the EUR/USD and GBP/USD has turned you more cautious, that’s fine, but be reminded that I still perceive significant value to be a buyer on weakness amid intermarket divergences in the USD prop index.

The picture for the USD doesn’t get any better as I shift the focus to the USD/JPY or USD/CAD. Here, resolution of old ranges have finally eventuated, which sets a target of 106.00 in the former, while the Loonie has already met its 100% projection target.

In the next 24h, the FOMC takes center-stage with its latest policy decision, which is highly unlikely to alter the currency groovy psyche of the market. They have pretty much gone all in and there is little else they could do at this point in my opinion.

There is talk that they’d look to clarify the QE guidance but overall, the time from the emergency measures taken during the COVID-19 crisis and now do not seem to warrant even further drastic measures, especially as the equity market has been firming up. Fed Chairman Powell pres conference is where the main focus will reside.

Note, we learnt that Fitch downgraded Italy to BBB-, which led to BTP/Bund spread dipping from 250 to 220. However, with the ECB buying everything, the movement in the Italian yields was far from dramatic and not a major driver in the Euro.

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Insights Into Market Flows

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.

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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