Featured The Daily Edge

The Yen goes for a steady run

If you were focused on trading the London session where most of the Forex volume occurs, trading the Japanese Yen with a bullish bias became hands down the trade to exploit. The strong net gains in the Japanese currency were the most impressive judging by the gains printed in the US equity space, which is rather anomalistic. 

Let’s get started…

Scan of Forex performance

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 forex basket. Indicators are available to use these measures via Tradingview and MT4.

 

By reviewing the action last Friday, the British Pound emerged as the strongest currency. Interestingly, the bulk of the gains occurred in the pre-London session. Once the London boys came online, the currency ended up treading water and its performance.

The currency, most suppressed out of the G8 forex indices, included the US Dollar and portrayed a steady downward stepping dynamic. This bearish inertia picked up momentum from the instant Frankfurt flows kicked in, all the way to the final minutes in New York.

When it came to the Canadian Dollar, while the net daily effect was marginally less negative than in the US Dollar, the selling that arose out of the London session was very aggressive. After an initial push, it was a downward streak for the rest of the London session. The disparity in performance against the AUD was quite significant.

If you were focused on trading the London session where most of the Forex volume occurs, trading the Japanese Yen with a bullish bias would have become, hands down, the trade to exploit. The strong net gains in the Japanese currency were the most impressive, judging by the gains printed in the US equity space, which is rather unusual.

In fact, if we were to analyze the performance of the Australian Dollar to the Japanese Yen in the last 24h, it would have been quite rare to spot an equally bullish performance pattern. As a by-product of this matching performance, we ended up with a Doji type candle that communicated indecision in the AUD/JPY daily timeframe.

I also noticed the sluggish behavior of the New Zealand currency. It had a very contrasting performance against the Aussie in the Asian session. By the end of the day in New York, the Aussie fared far better than its neighboring currency, even though flows stabilized in London.

My last observation was that of the dynamics between the Euro and the Swiss Franc. Typically, both currencies are a mirror image of each other, unless we end up with true risk averse dynamics. These two currencies were far from exhibiting any momentum, offering lame prospects to be traded on an intraday basis.

Trading via Forex indices

To see an expanded version, right-click and select ‘open link in new tab’. In this section, I provide insights into intraday currency trades via the G8 forex indices. The aim is to match the weakest vs the strongest. I apply the SMT indicator to measure multi-timeframe momentum alongside additional metrics. Due to popular demand, I am working on an extension of my course to add this strategy.

 

In the example below, I highlight a short trade that would have been available in the CAD/JPY. This opportunity came as a result of initially crosschecking the bearish outlook, at an index level, in the CAD index, while conversely, matching that against a strong JPY.

Through a vertical yellow line below, I outline the moment when both the CAD and the JPY offered a strong enough confluence to pull the trigger. This trade happened 2 hours into the New York session last Friday when both customers orders and liquidity were still elevated. All was perfectly in tune with the flows, as seen on Friday and described above.

Trading via trap patterns

To see an expanded version, right-click and select ‘open link in new tab’. The table above shows key metrics (momentum + structures) in different timeframes (4 hours and daily) to assist students of my TT course in selecting the best trending markets (link to the script). A video on the power of the SMT can be found here “How To Trade Forex Trends Like A Pro”. The video “Fractals + SMT Upgrade: The Multi-timeframe Functionality” is also a Must-Watch to fully grasp this style. A fully-fledged trading course about the TT (Trapped Traders) pattern will soon be available via Global Prime Trading Academy website.

 

There were no trades available as part of the trap pattern strategy last Friday. The 15-minute timeframe didn’t fire any signals as per the rules. The pullback seen in risk-off associated currencies such as the Japanese Yen or the Swiss Franc led to a major reduction in the congruence of trends through the 4 hour and daily timeframes as the table above shows. Heading into today’s London session, the weakness in the CAD was most noticeable, which made for some great trends in GBP/CAD or AUD/CAD.

Hot trade of the day (video)

In this section, I pick a market or several ones that either presented an opportunity based on the concepts I teach or alternatively I may also use this section to provide lessons. My video analysis below elaborates further on the logic behind the trade.   

Economic indicators & events

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, watch this video. The indicator allows you to save time and avoid mistakes.

Important footnotes

Market structure 

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 the idea of using what I call the smart money tracker. The settings and the indicator can be accessed via our Discord room, where traders from all walks of life interact frequently. In this video, 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.