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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.
A setback in the risk tone proliferated across the currency space ahead of the FOMC policy decision this Wednesday, with a notable disconnect in terms of the percentage movements observed between the performance of equities and risk-on currencies.
The roll-over in the commodity-linked FX, especially the most sensitive to risk such as the AUD and NZD, came as part of a move disjointed from the relatively tepid fall in the S&P 500 (-0.8%). The rise in the CHF and JPY reinforced the notion of a dial back in risk.
The USD was the exception as even the mild sell-side pressure on equities away from a key resistance failed to re-invigorate it. The general theme of USD weakness did nonetheless slow down, but it still under-performed most of the FX excluding AUD, NZD.
The rallies in currencies the likes of the AUD and NZD are at a very mature stage now, so it is to a certain extend logical to expect a market unloading long exposure ahead of the Fed. The same can be said for equities as position squaring activity picked up.
These moves play into the view that prudence ahead of the FOMC is warranted. The Central Bank successfully executed a pump in stocks after flooding the economy with USD in order to create a circuit breaker to the disorderly moves. But with the S&P 500 having rallied 45% from its March low, the focus is quickly shifting to forward guidance that clarifies when/if some unwinding of the emergency measures introduced will be considered to avoid a further fracture between reality in the ground and valuations.
Having laid out the backdrop we find ourselves in, let’s now tackle the latest technicals and my main takeaways, while being aware that the FOMC will likely modify the picture.
Additional views on GBP/USD, USD/JPY, AUD/USD, alongside further elaboration in the markets above can be found in the video below. Remember, at the core of this analysis, I account for structures, momentum, volatility, intermarket and levels.
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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