The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.
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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.
The moves in FX were modest with fluctuations in confined ranges the norm. However, as we move into Asian trading on Thursday, risk-off associated currencies (JPY, CHF) are having another go higher as the market still acts prudent amid the resurgence of COVID-19 cases in the US and fears of a clean sweep by Democrats in the Nov election.
The surge in new COVID-19 cases in the state of Texas, with hospitalisation rates up by 11% over past 24 hours and exploding to over 85% since memorial day suppressed the mood in stocks. That said, Vice-President Pence keeps de-emphasizing the situation. In a WSJ Opinion piece Pence said “there isn’t a COVID ‘Second Wave’, and with testing, treatments and vaccine trials ramping up, we are far better off than the media reports.”
The next key driver for the day, especially in the valuations of equities came in the form of the revelations by John Bolton (Trump’s former National Security Adviser), causing a late day fall in stocks. Bolton published a series of bombshells via excerpts of his upcoming book, noting “The president pleaded with Chinese leader Xi Jinping for domestic political help, subordinated national-security issues to his own re-election prospects and ignored Beijing’s human-rights abuses”.
The allegations made above by Bolton led to an immediate decline in the chances of a Trump re-election, with the website PredictIT projecting now a Democratic clean sweep (Presidency, House, Senate) with the chances ramping up to 54%. A defeat by Trump in the next Nov election should send shock-waves into risk assets while it is also thought to be a negative input for the likes of the US Dollar.
We also saw Fed Chair Powell complete his twice a year testimony on Capitol Hill. Today was the turn to answer questions from the House Financial Services committee and I must say, it all went pretty smoothly with no unexpected comments. Powell kept the narrative of support for the economy via more stimulus intact and remained very cautious about the sustainability of the recovery due to the dicey pandemic situation the US is facing with a somber outlook for jobs near term.
Going forward, the currency space should be given a fair dose of volatility that hopefully can get us out of first gear. The day started with the disappointing NZ Q2 GDP at -1.6% vs -1%, followed by the Aussie employment report, which came at -227.7k vs -78.8k, a downbeat reports that added further pressure to the Aussie.
Later in Europe, it will be the turn for the GBP to be given a jolt as the BoE meets to re-formulate its monetary policy settings. Expectations are for the BoE to keep its cash rate on hold at 0.1% accompanied by a ramp up in its QE bond buying commitment. The BoE is en-route to reach its bond buying threshold by early July, hence why economists are calling for an increase in the size of its QE programme by 100b pounds at the bare minimum, which would then total 745b pounds.
In the US, the Jobless Claims will be monitored closely. At the same time, the market will watch the Philly Fed for some minor uptick. Do remember though, the key drivers that should keep ruling sentiment include the daily changes in COVID-19 cases/hospitalizations in the US, the lingering concerns over the prospects of a Trump re-election, as well as the fluid situation in Beijing following a COVID outbreak.
Until here the key points pertaining to the fundamental landscape so that readers can better grasp what the market is watching. The next phase is to touch on the technical outlook in a range of currency pairs as well as the state of affairs in the S&P 500 as a risk barometer. Please, refer to the video posted below where I share my take in detail.
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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