Resurgence In USD Demand As Stocks Sold
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Resurgence In USD Demand As Stocks Sold

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.

“Sell in May and go away” to apply this year? It’s anyone’s guess, but what’s clear is that the new month is not off to the best start as sell-side action in equities dominates.

We have the S&P 500 looking like its en-route to retest that critical level of support just ahead of the 2,700.00. This directional push carries momentum behind as depicted by the SMT in the 4h chart, but be reminded that such behavior still remains in contradiction with the fairly constructive technicals we’ve seen as of late in the daily chart.

While it’s not my focal point to get into why each and every move occurs (it can take you down a rabbit hole), most of the consensus appears to be looking at two potential drivers.

First, as underscored for over a week, US-China geopolitics are flaring up with Trump threatening $1tn tariffs as a penalty to be paid by the Big Panda in COVID-19 retribution.

Another narrative picking up is that where the 90-year old legendary investor Warren Buffet, at the 2020 Berkshire Hathaway Annual Shareholders Meeting Streamed by Yahoo Finance caught many off guard by announcing the selling of its Airlines stakes.

Buffet said: “I think there are certain industries, and unfortunately, I think that the airline industry, among others, that are really hurt by a forced shutdown by events that are far beyond our control. The airline business — and I may be wrong and I hope I’m wrong — but I think it’s changed in a very major way. The future is much less clear to me.”

Elon Musk’s comments on Friday, tweeting he thought the stock of TESLA was overly rich, didn’t help. The end result was a fall of more than 10% (about $14bn taken off its market cap). That was certainly an expensive tweet to put out there, that’s for sure.

So, with the selling action seen in stocks, and just coming off the heels of a lively month-end balancing flows period, where does this leave us in Forex? For a starter, in today’s video I point out a rather attractive sell-side level playing out in EUR/USD as an evident USD prop index divergence converged at a 100% measured move.

With the EUR/USD rolling over in what I see as a broad daily range still playing out (happy to be proven wrong), selling strength this high is not a bad proposition from a daily technical + intermarket standpoint, even if the 4h chart is dangerously bullish.

Shifting gears to the GBP/USD, the lack of drivers in the Pound amid the absence of idiosyncratic Brexit-charged headlines has led the pair to behave as a function of the aggregated USD flows as I detail in today’s video analysis. The 4-chart remains bullish, but the acceleration back down and a daily range warrants prudence.

In the AUD/USD, one needs to follow the USD and the S&P 500 to gauge the next directional movement in this market. The correlation coefficients are running extremely high, so the ultimate indicator to get intraday value-oriented edges to define a bias is the combination of one’s technical techniques and the dynamics at play in USD/stocks.

In today’s video, I also spend time to make sense of the technical we are seeing in the USD/JPY, which intermarket-wise, makes it a tough call keep calling lower levels amid the resurgence of USD demand. However, the daily timeframes paints a different picture where the sell on strength bias is one still justified, unlike the 4h, which consolidates.

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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