Up Go Stocks & Down Goes The US Dollar
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Up Go Stocks & Down Goes The US Dollar

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.

Let’s get started…

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.

Bulls kept pushing equities higher with flying colors towards levels that even if hard to justify, are nonetheless the default technical view whispered by price action all along. The S&P 500 broke into new trend highs and it looks like 3,000.00 is around the corner.

The buying frenzy in US equities can be attributed to news about the positive trial results of Gilead’s Remdesivir to treat COVID-19 patients. The FDA said it is in talks with Gilead, the maker of remdesivir, about making the drug available to patients. If this eventuates, it reinforces the notion of an acceleration in the containment rollbacks in the US.

The New York Times goes as far as to report that the US Food and Drug Administration plans to announce an emergency-use authorization for remdesivir as soon as this Wednesday, citing a senior administration official. Be aware though, this is not to be confused with a vaccine, but it nonetheless can help the rollback strategies.

Besides, on top of the strong gains reported by Alphabet on Tuesday as revenue exceeded expectations with “user returning to more commercial behaviour”, Wednesday was the time for Facebook and Microsoft to report earnings, both showing strong numbers (Facebook shared rose 7%, Microsoft +1.5% in post market close trading).

Before tackling  the outlook in Forex majors, let me recap the latest decision by the Fed as part of its update on monetary policies. There were no fireworks with the target range kept at 0-0.25% and Powell emphasizing that “we are not changing that guidance today”, further implying that it won’t happen until full employment returns.

As I shift gears to the currency market, now that we have a better grasp of the positive backdrop in equities, we can understand why weakness in the US Dollar continues to be feeding through. As noted in yesterday’s video, the Euro and Pound were advertised at discounted levels and those looking to engage at the lows got rewarded.

Even if not at discounted prices, the picture in other currencies that had my attention yesterday (AUD, JPY, CAD…) was pretty poor for the interest of the USD. Fast forward 24h, and we’ve seen without exception the latter lower as technicals dominate.

So, as a form of a quick recap before one jumps into today’s video, where do we stand today in the Forex majors? Well, as I put it, “the relatively easier gains in the EUR/USD have already been made” as we are faced with a sticky level of resistance overhead.

The same picture is playing out in the GBP/USD domain, where we seem to be quickly transition from one period of consolidation into another before we know it.

Note, in the European afternoon, the ECB meeting will take place. Consensus is for no major announcement, and at best, some economists are anticipating minor tweaks to the QE program. For a more in-depth preview on what one could expect, Carsten Brzeski, Chief Economist at ING and someone I find quite sharp and enjoy following, has provided his comprehensive thoughts to the masses.

In the high-beat currencies, especially in the AUD and NZD, the outlook to keep capitalizing in this run of USD weakness looks promising and far from over as the technicals tell us. In the Aussie in particular, I am looking at a target of 0.6640/50.

The USD/JPY is in an active sell-side campaign en-route to 106.00 in my book, while USD/CAD is the one that looks excessively cheap with a bounce to release some of these extreme readings something I’d like to see first.

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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