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‘Risk Off’ Returns With A Vengeance

We had a classic fly to safe haven assets with no particular catalyst once again. The usual suspects (USD, JPY, CHF, Gold) were the main risers while commodity-linked currencies (AUD in particular) and the GBP fell sharply amid the sell-side flows in equity indices since Europe.

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 had a classic global flight to safety with no particular catalyst once again but rather a range of worries for Mr. Market. The usual suspects (USD, JPY, CHF, Gold) were the main risers while commodity-linked currencies (AUD in particular) and the GBP fell sharply amid the sell-side flows in equity indices since Europe.

Media outlets are attributing the latest selloff to the tougher stance by a handful of European countries in re-imposing antivirus restrictions, underwhelming vaccines news as the WHO stated that the Remdesivir treatment had little effect on Covid-19 mortality, plus the well-known disagreements in the US to get a new fiscal stimulus deal.

The first currency that has my attention is the AUD, exposed to above average vol today after a disappointing Australian jobs report. Besides, the RBA Governor Lowe gave a strong hint of further easing ahead by noting that it is possible for the Central Bank to cut rates to 0.1%. It was this admission by Lowe that kept the AUD well supplied.

As per the Pound, it performed poorly amid Brexit negotiations coming down to the wire, yet not as bad as the AUD. In a statement by Brexit negotiator David Frost, he recognized that they were surprised and disappointed at the outcomes achieved in the EU summit. The market is still treating the Pound, however, as if not all hopes are lost since UK PM Johnson pledged not to blow it all up and continue the negotiations for another 2-3 weeks. Will it matter?

David Frost tweeted: “Disappointed by the #EUCO conclusions on EU/UK negotiations. Surprised EU is no longer committed to working “intensively” to reach a future partnership as agreed with @vonderleyen on 3 October. Also surprised by suggestion that to get an agreement all future moves must come from UK. It’s an unusual approach to conducting a negotiation. PM will set out reactions and approach tomorrow…”

The true ‘risk-off’ spell the markets are going through is well reflected through a pair as risk sensitive as the GBP/JPY. It is precisely this pair that offered a great short opportunity in the last 24h by crosschecking the order flow dynamics between the 8h chart (best to capture session by session ebbs and flows) and the 1h time scale. The video below walks you through the rationale that led to the sell-side idea.

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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

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.