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Risk-Off Returns, USD & JPY Strengthen

Financial markets are exhibiting risk-off dynamics resulting in the US Dollar and the Japanese Yen catching a strong bid while global equities and bond yields fall. Surprisingly, the sell-off in risk assets was largely contained in the likes of the Aussie or the Kiwi, holding up extraordinarily well amid the severe deterioration in the risk mood. Meanwhile, the European currencies (EUR, CHF), which did put on a solid performance as of late, didn't fare that well on Monday.

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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. 

Financial markets are exhibiting risk-off dynamics resulting in the US Dollar and the Japanese Yen catching a strong bid while global equities and bond yields fall. Surprisingly, the sell-off in risk assets was largely contained in the likes of the Aussie or the Kiwi, holding up extraordinarily well amid the severe deterioration in the risk mood. Meanwhile, the European currencies (EUR, CHF), which did put on a solid performance as of late, didn’t fare that well on Monday.

The worst performer for the day was the Canadian Dollar. If one goes back to the last video I produced yesterday, you will notice I pointed out this currency as one subject to further weakness short-term after the CAD index had broken its structure to the downside. Moreover, this was the currency to short as part of the hot trade of the day. Ultimately, the idea played out well as documented in today’s video.

We are at a crossroads just ahead of the US election in a state of affairs best described as dicey and highly uncertain. The treacherous environment leaves real money vey few options. In the US we might be going through a change at the top with Biden firmly on the lead. Besides, the US fiscal stimulus stalemate continues. In Europe we are seeing renewed widespread shutdowns. The UK is caught up in the middle of Brexit trade deal talks, while the economies of emerging markets are too imploding.

The number of new COVID-19 daily cases is back setting record numbers in both European countries and the US, which is only worsening the risk dynamics in what may well morph into another wave of economically damaging effects. We are starting to see countries like Spain (state of emergency with night curfews), Italy (all bars and restaurants to shut down by 6pm), to name a few, re-imposing tough measures to slow down the spread of the COVID-19 cases.

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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.