U-Turn In Risk Sentiment Yet Again
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U-Turn In Risk Sentiment Yet Again

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

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. 

The state of unpredictability by the Trump administration continues to be well portrayed through the erratic market swings this week. Trump opened the can of worms by announcing the cancelation of further fiscal stimulus talks until the election is over. However, in just a matter of hours, there’s been a U-turn by Trump, tweeting that he would support a one-off stimulus for particular sectors. It is still a very dicey environment as to whether Democrats and Republicans can agree.

Trump tweet read: “If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy?” He also said that along with those checks, he’d agree in targeted stimulus for the airline industry ($25bn) and US small businesses ($135bn for the paycheck protection program), with unused funds from the CARES act.

The rebound in risk sentiment, driven by Trump’s tweet, represents an admission that the market still holds some hopes that some sort of stimulus deal in the US could still be reached before the election. The outperformance of the commodity-linked currencies (AUD, CAD) tells us succinctly this new shift in narrative with the EUR and CHF also holding up with style this waxing and waning by Trump. The notable loser for the day was the JPY with the USD rather neutral. The GBP traded fragile as the UK set October 15 as the deadline to walk away from further trade negotiations with the EU if no deal struck.

As per the FOMC minutes, even if it failed to be a market mover (the focus is on the fiscal stimulus and Biden vs Trump polls), the Fed hinted that they are prepared to step up to the plate once again if necessary by engaging in further easing post-election. This represents a new input that was not noted in Powell’s press conference in the last FOMC nor in recent speeches. The Minutes noted that “many participants had assumed additional fiscal support and that if future fiscal support was significantly smaller or arrived significantly later… some thought it would be appropriate to further assess and communicate how the Committee’s asset purchase program could best support…maximum employment and price-stability goals.”

Amid this back and forth in risk sentiment, finding instruments with well defined setups in the last 24h has been a tall order. Nonetheless, I’d like to highlight a short opportunity I’ve entered in the Gold market off the 8h chart (the best to capture session by session flows) in what I find to be a great looking setup by combining the two principles I teach. Firstly, the order flow has turned in favor of sellers off a key level of resistance. Secondly, the latest aggressive selloff created a trapped traders setup completion. Therefore, I’ve gone short at the retest of the previous swing low that led to the fake breakout.

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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 will further elaborate on the logic behind the trade.   

Insights – Hot Trade Of The Day

In this video analysis I dissect the information above. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter and manage a position, hence the video is intended as educational in nature and not financial advice. 

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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 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. In this video I lay out the elements I look into to call trend directions.

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