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Strong run of capital outflows in the USD

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As the US Presidential Election got called in favor of the Democratic representative Joe Biden by most media outlets, the main story continues to be the plummeting of the US Dollar across the board. 

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. 

As the US Presidential Election got called in favor of the Democratic representative Joe Biden, by most media outlets, the US Dollar continues to plummet across the board.

USD under pressure

When analyzing the currency on an equally-weighted basis, it can be safely stated that the USD has been underperforming by losing nearly 2% vs its main peers. And no matter which USD cross you look at, each and every one communicates the same story – USD sellers have a clear upper hand.

Technical prospects 

After dissecting the technical merits, I found the EUR/USD testing bids near-by 1.19, which represents the highest levels since September 17th this year.

What I found extremely interesting is that in the last 24 hours, after applying my proprietary trap traders pattern setup, I could hold a long exposure in the EUR/USD.

If you take a peek at the GBP/USD, you will definitely see a positive change – the moment you can break and accept beyond 1.3180 (highest on October 21st) and key technical inflection point.

The measures of momentum (SMT indicator) and structures (Fractals Breakout Indicator) both communicate confidence and great expectations in the GBP/USD. The shallow dip through 1.31, last Friday, was convincingly rejected off the 13-wma, which reinforces the positive outlook.

As I shift attention toward the commodity-linked currencies, the technical prospects look even more compelling. The AUD/USD delivered a price action that broke a key structural level at 0.7150. 

The US Dollar is similarly ‘gripping’ when cross-checked against other commodity-linked currencies, the NZD or the CAD, where both are technically positioned to keep ensuring further gains. 

What about the USD positioning against the Japanese Yen or Gold? This is where the weakness of the USD lies. The strong rise in the US equities since the Election Day has had no effects in slowing down the depreciation of the USD against these two assets. This action seals the notion that what we are witnessing is a strong run of capital outflows in the USD.

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, further elaborates on the logic behind the trade.   

 

Insights – Hot trade of the day

In this video analysis I dissect the hot trade of the day. A fully-fledged trading course, including lessons on how to trade this pattern, will soon be available via Global Prime Trading Academy website. While the video is intended as educational and not financial advice, it portrays the power of trading the pattern the right way.

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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. The indicator allows you to save time and avoid mistakes.

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. Watch this video where I go through the layout and all elements of the Discord room in great detail.

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.