The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.
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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.
Before getting into today’s technical stance in the most traded instruments, a note of caution to traders. We have a rather toxic combination by having UK markets closed in observance of May Day coupled with the release of the US NFP figures.
A special mention deserves the US job figures today, set to print by far the worst numbers in history with estimates ranging from -8 million all the way to -22 million with a jobless rate of about 16%.
What I’d like to emphasize by pointing at these two aspects today is that the absence of London may see currency flows subdued, while the US jobs report could create more erratic than usual price fluctuations.
By the way, a point to reinforce. You’ll hear talking heads looking to justify every daily move due to this or that. Suggestion? Unless clearly defined by matching time and space traveled, I urge you to simply treat fundamental narratives as contextual information to be aware of but not to make decisions out of it…
Why? It’s really hard to make consistent decisions based on fundamental information as it becomes very subjective whereas structure, momentum or other technically-derived measures is much more fitting in its objectivity. Remember, fundamentals tells us the ‘why’ we get from A to B and ‘technicals’ the how we get there.
Some may argue the equities remain positive as the market remains optimistic about the fast-tracking of the containment rollovers both globally and in the US, others will tell you the resumption of US-China trade talks may be a positive catalyst. But by the same token, tensions between these two countries over the origin of the virus is negative.
Hence, shifting gears to the technicals/intermarket analysis, in today’s video, I argue that at last, there is again communion between the 4h and the daily to the bullish side in the S&P 500. Besides, with the VIX retesting its prior trend low, this is looking like a market ready to attack the prior high around the 2,960.00 ahead of the 3,000.00 mark.
In the EUR/USD, we’ve seen an abrupt rejection off the lows, which as reminder, was always a clear risk to be accounted for as we were retesting the low-end of a daily range. At this point, however, with the 4h not yet flashing buys via the SMT and the EUR index (main weekly driver) still pressured lower, I can’t see immediate follow through.
A brief note on EUR fundamentals. Yesterday, ECB President Lagarde downplayed the recent ruling by the German Constitutional Court requesting a re-assessment of the QE program. Lagarde said the ECB was “undeterred” and that they remain “answerable to the European Parliament…”, adding that “we will continue to do whatever is needed, whatever is necessary, to deliver on that mandate.”
My view in the GBP/USD diverges little from that expressed via the EUR/USD, as the push in the pair comes as a function of the USD index weakening, which has not been the key driver this week. Therefore, with GBP index our main guidance (remains at trend lows) and key resistance overhead in GBP/USD I cannot see a meaningful buy-side case until the intermarket flows and technicals improve.
The Pound initially appreciated on the back of the BoE policy decision, which refrained from expanding QE on a 7-2 vote. The market is still expecting the BoE to beef up its QE programme in coming months. The Bank sees a collapse of Q2 GDP to the tune of 25% with Governor Bailey sounding rather upbeat, saying he projects economic activity to bounce back “much more rapidly than the pullback from the global financial crisis”.
The market where I see the USD most punished out of the G4 FX I focus in today’s video is against the Australian Dollar. Here we have a clear example of a realignment of bullish tendencies in both the 4h and the daily timeframe, at a time where the AUD index (key driver), is running away. This provided a great discount entry yesterday.
On the USD/JPY front, even if my base case supports further downside continuation, the JPY index (key driver this week), is yet to make a strong case to resume the downtrend in the pair. This does not deter me from supporting lower levels as the daily chart, which remains my main guidance, is clearly pointing lower with all the boxes ticked.
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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.
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!
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.
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.
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.
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.
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