‘Risk On’ Sustained Throughout The Week
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‘Risk On’ Sustained Throughout The Week

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.

Let’s get started…

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 main take away from the last 24h of price action is that equities and currencies, despite the latter still moving at a slower pace, are still very much in-sync signaling that we are slowly but steadily morphing into a stage of more protracted ‘risk-on’ conditions.

Many will keep scratching their heads over the daunting task ahead by the US to revive the economy as COVID-19 casts a long shadow. But when the Fed acts as the liquidity facilitator of first resort to keep the market afloat, the temptation is to keep the bid in risk.

The S&P 500 gained 0.45% by NY close although most of the gains happened ahead of the upbeat US employment report (4.8 million new jobs). But that’s just one way to see it, one side of the coin if you will, because since February the change in NFP is still negative 14.75 million with the jobless rate still firmly above the 10% mark.

What’s more, since US NFP was published on a Thursday due to today’s US independence day holidays, it overlapped with the US jobless claims report. There, the situation remains dire to say the least as based on last week’s data (captures more timely the reality), initial applications for unemployment benefits stood at 1.43 million new applications vs 1.48m in the previous week. Tough road ahead.

The strides made post jobs in US equities could not be sustained and quickly evaporated, attributed to the worsening state of the US virus stats (largest jumps in some of the hot spots since May 9), Dr Fauci – the US infectious disease boss – warning of the dangerous mutations of COVID-19 to spread more easily than before, and US Economic Adviser Kudlow airing his unhappiness with China.

Larry Kudlow said that the US is very unhappy with China’s infiltration to hack into the government and private corporations. Fox News quoted him as saying: “We are very unhappy with China. And yes, there are going to be export restrictions, particularly with respect to military, national security and some sensitive high technology,”

With the above backdrop out of the way, let’s now dive into the FX market, where the picture unfolding this week is resonating with a market that appears to be setting the stage for what may turn out to be more long lasting vol levels and discernible dynamics.

At this stage, the weekly performance by the commodity-link block NZD, AUD, CAD and GBP is suggestive of a potential turning point. These currencies have opened up a significant gap against the risk-off associated currencies the likes of the USD, JPY, CHF, which is a promising sign to untangle what’s been a tricky time to call directions with any high degree of conviction off the higher timeframes.

What I also like is the fact that this performance has been sustainable across the week, it’s allowed technical cracks away from congestions, and most importantly, it comes at a time when the equity space is having its own watershed moment technically as the S&P 500 recently transitioned into a bullish phase in the 4h and daily time scale.

And with the above said, I strongly encourage you to find some time in order to watch my current thoughts in the marketplace. The video is an opportunity for you to pick on my brain as it relates to the technical analysis of the charts, which if anything, should allow you to gain much deeper insights on how to contextualize markets in a mechanical way.

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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