Technical Correction In Risk Sentiment
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Technical Correction In Risk Sentiment

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.

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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 Tuesday’s price action was an explosion in the price of Gold, hitting its highest level since 2011, alongside the eruption in buy-side flows in the Sterling amid speculation of a revival in Brexit talks, all in the context of a very weak Canadian Dollar and faltering US equities, unable to keep up the momentum but still bullish.

To be frank, with the type of run we’ve seen in risky assets over the last week, the setback in the likes of equities or the Aussie (led by the RBA + Melbourne lockdown) is nothing to be overly concern for now from a technical perspective. The moves in either category (Forex or Stocks) have not been particularly punchy, which plays into the view that this is just simply a technical correction in a conducive ‘risk on’ environment.

In stark contrast, a market that has decoupled from the modest movements in FX – except in GBP and CAD as the stand out outperformer and underperformer respectively – includes the price of Gold, making a new 9-year high and just a whisker away from touching the $1,800.00 round number as the next psychological target.

Further elaboration in the Sterling rally is needed. This time, it can be clearly attributable to a surprise informal dinner announced between the UK government’s chief Brexit negotiator, David Frost, who did host his EU counterpart Michel Barnier , “in a bid to revive flagging talks on a trade and security deal”, the Guardian notes.

Concerning the US, in an interview to the FT, Fed’s Bostic said high-frequency data showed a “levelling off” in economic activity both in terms of business openings and mobility, adding that “we’re watching this very closely.” Besides, Fed’s Mester reiterated the same point, noting that “over the past week or so, there’s been some levelling off, and I think it’s probably due to the increase in cases.”

With regards to COVID-19, the most notable news over the last 24h included a new 6-week lockdown in Melbourne (Australia) as the number of cases have suddenly risen, while in the US, we saw numbers in some hot spots petering out ever so slightly, with the number of people hospitalized and cases overall not as high as the 7-day averages.

As I shift gears into technicals, the price of Gold has finally resolved its congestion phase and $1,800.00 is the next 100% projection target off the 4-hour time scale. However, I am looking into $1,815.00 as an amplified target considering the daily bracketed area it broke. Long GBP against the weakest links appears to be an attractive proposition as well with structure/momentum agreement in different time scales.

Gold, the Pound and the Canadian Dollar, as I demonstrate in today’s video analysis, have turned out to be the markets one must be most attentive for trend trading opportunities. These are the instruments indicating concordance across higher timeframes (4 hour/daily). Find out how I am breaking it all down in the video below.

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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