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Global Prime: Daily Market Digest

Discussion in 'Market Predictions and Reports' started by IvanGlobalPrime, Aug 8, 2018.

  1. IvanGlobalPrime

    IvanGlobalPrime Private

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    Bond Yields Fall As Focus Back To Easing Cycles

    POSTED ON: 03 JUL, 2019

    The tormented state of affairs in global bond yields just days after the US and China agreed to a trade truce is a clear indication that it's going to take a lot more than just promises of a resumption in trade talks if the market is to keep buying into the idea of risk trades.


    The Daily Edge is authored by Ivan Delgado, Market Insights Commentator at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth look of market dynamics, factoring in fundamentals, technicals, inter-market in order to determine daily biases and assist one’s decisions on a regular basis. Feel free to follow Ivan on Twitter & Youtube.

    Quick Take

    The tormented state of affairs in global bond yields just days after the US and China agreed to a trade truce is a clear indication that it's going to take a lot more than just promises of a resumption in trade talks if the market is to keep buying into the idea of risk trades. BoE's Governor Carney was the last key actor to warn, rightly so, that as the tactics of protectionist policies by the US pans out, the global economy not only is on tenterhooks but if tensions continue it may "shipwreck" prospects for growth. It is also clear that the reversal in global yields back in line with the main macro trend means the market has 'moved on' from any G20-induced paraphernalia to be fixated back to the path of global central bank easing. The Japanese Yen's strong appreciation against most currencies is the proof in the pudding that risk is far from conducive, as is the sell-off in Crude Oil despite OPEC agreed to extend production cuts for nine months tells, which us a similar story. Meanwhile, the ballistic move back up in Gold, tells us global easing cycles remain the true catalyst to keep the bull run going strong. Interestingly, the two most heavily traded currencies, the EUR, and USD, both performed poorly, even if it was the Sterling that had the worst daily run as the market comes to terms about the pessimistic outlook by BoE's Governor Carney. The diversification of flows favored the AUD and CAD although aggregated tick volume in both indices does not suggest further continuation with Intermarket flows not backing up the trends (Lower Yuan and Oil).

    [​IMG]
    Narratives In Financial Markets

    * The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.

    • Global bond yields implode after BoE’s Carney warns of trade tensions as the main source of concern that may further evaporate the prospects for momentum in the global economy. Carney used alarming words such as trade strifes mat “shipwreck the global economy.”
    • The market has also shifted its view on the BOE policy prospects by assigning a 50% chance of a rate cut by the BoE before the end of the year. As a result, long-term UK yields took a hit that has sent them below the BOE benchmark interest rate in the first inversion in a decade. A sharp fall in the UK construction PMI, lowest since April 2009, added to the sour sentiment.
    • Further evidence of the protracted bullish macro trend in lower global yields was music to the ears of Gold bulls, taking the precious metal significantly higher against a basket of G10 FX.
    • Oil suffers a major slide even as OPEC agrees to extend production cuts for nine months to prevent 100 mil barrels build-up. All countries promised to improve on compliance with cuts. The dark clouds hovering over the outlook for the global economy outweighed any positives as the trade truce between the US and China is rapidly fading away amid lack of concrete details.
    • The AUD holds firm undeterred by the decision by the RBA Board to slash interest rates for the second month in a row to a record low policy rate of 1.00% and signaled that the labour market continues to play a key role in adjusting monetary policy further if needed. The Central Bank didn’t rule out further rate cuts but it frankly did not provide sufficient evidence that it aims to cut again in the short-term, making its decision more labour data-dependant.
    • RBA's Governor Philip Lowe, in Darwin, said that the recent rate cuts will help lower unemployment, reduce spare capacity while the Bank will closely monitor how things evolve over the coming months. Essentially sticking to the RBA statement script that further rate cuts will only come on a conditional basis if the labour market does not improve as envisioned. All else being equal, meaning no further deterioration in the economy or global trade conditions, the RBA’s back-to-back cuts may provide a cushion to stand pat until Q4 2019.
    • Germany’s May retail sales fell by 0.6% vs +0.5% m/m expected, a major negative deviation that only comes to show the fragile state of affairs in the engine of growth for Europe.
    • A report via Bloomberg notes that the ECB sees no need to rush into a July rate cut, preferring instead to wait for more data on the economy, citing officials familiar with the matter. Acting during the September meeting appears to be the options most endorsed as updated economic forecasts will be updated even if the report also speculates that tweak in the language may exist during the July meeting to set the stage for further easing as an imminent outcome.
    • White House's trade advisor Navarro notes the US is headed in a very good direction on China. However, his language indicates no rush to readdress the key sticking points. Navarro said talks are the basis of current negotiations, but again, it will take time to get it right.
    • Fed's Mester, who happens to defend a hawkish stance, told reports in London that she prefers not to cut rates proactively even if recognizing that recent mixed data suggest downside risks have risen with international trade policy a new source of uncertainty.
    • EU leaders agreed to appoint Christine Lagarde to an 8-year term as next ECB President by replacing Mario Draghi, whose term at the helm of the Central Bank ends by the end of October. EU's Tusk also confirmed an agreement to appoint the EU Commission President to Ursula Von Der Leyen while Charles Michel for Council President Foreign policy chief.
    • Prime Factor Capital has been given the green light by the UK watchdog to become the first crypto hedge fund approved as a full-scope alternative investment fund manager. According to the report, the firm will be allowed to hold over 100m euros in assets under management. The price of Bitcoin has recovered back above 11k after the traders learned the bullish news.
    • Despite news of a trade truce, including Trump now allowing on a strictly restrictive basis, for the Chinese tech giant Huawei to purchase equipment from US companies, news emerged that US government staff are still told to treat Huawei as blacklisted, Reuters reports.

    RORO (Risk On, Risk Off Conditions)

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    Recent Economic Indicators & Events Ahead

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    Source: Forexfactory

    A Dive Into Developments In FX (Technicals, Fundamentals, Intermarket)

    EUR/USD: 100% Proj Target Pauses Move Down, Sellers Step In At Resistance

    [​IMG]

    GBP/USD: Bearish Outlook Persists, Cluster Of Bids Found at Proj Target


    [​IMG]

    AUD/USD: Looking Rather Expensive Based On Intermarket Flows


    [​IMG]

    USD/JPY: Bullish Outlook Negated, Testing Critical Support


    [​IMG]

    Crude Oil: Focus Clearly Shifts To Sell Rallies


    [​IMG]

    Gold: Upside Breakout Of Descending Trendline In-Line w/ Main Technical Trend


    [​IMG]

    Important Footnotes

    • Risk model: The fact that financial markets have become so intertwined and dynamic makes it essential to stay constantly in tune with market conditions and adapt to new environments. This prop model will assist you to gauge the context that you are trading so that you can significantly reduce the downside risks. To understand the principles applied in the assessment of this model, refer to the tutorial How to Unpack Risk Sentiment Profiles
    • Cycles: Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of cycles, refer to the tutorial How To Read Market Structures In Forex
    • POC: It refers to the point of control. It represents the areas of most interest by trading volume and should act as walls of bids/offers that may result in price reversals. The volume profile analysis tracks trading activity over a specified time period at specified price levels. The study reveals the constant evolution of the market auction process. If you wish to find out more about the importance of the POC, refer to the tutorial How to Read Volume Profile Structures
    • Tick Volume: Price updates activity provides great insights into the actual buy or sell-side commitment to be engaged into a specific directional movement. Studies validate that price updates (tick volume) are highly correlated to actual traded volume, with the correlation being very high, when looking at hourly data. If you wish to find out more about the importance tick volume, refer to the tutorial on Why Is Tick Volume Important To Monitor?
    • Horizontal 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, the horizontal lines of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed and relevant to monitor. The Ultimate Guide To Identify Areas Of High Interest In Any Market
    • Trendlines: Besides the horizontal lines, trendlines are helpful as a visual representation of the trend. The trendlines are drawn respecting a series of rules that determine the validation of a new cycle being created. Therefore, these trendline drawn in the chart hinge to a certain interpretation of market structures.
    • Correlations: Each forex pair has a series of highly correlated assets to assess valuations. This type of study is called inter-market analysis and it involves scoping out anomalies in the ever-evolving global interconnectivity between equities, bonds, currencies, and commodities. If you would like to understand more about this concept, refer to the tutorial How Divergence In Correlated Assets Can Help You Add An Edge.
    • 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.
    • 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
     
  2. IvanGlobalPrime

    IvanGlobalPrime Private

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    Commodity-Linked Currencies Capitalize On USD Weakness



    A notorious outperformer in recent times is the CAD, with the AUD playing more of a catch-up move. The CAD not only saw positive fundamentals in the form of its first trade surplus in years but the rise in US equities but most importantly the bond yield spread vs the USD acted as an underpinning factor to keep the momentum going.

    The Daily Edge is authored by Ivan Delgado, Market Insights Commentator at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth look of market dynamics, factoring in fundamentals, technicals & inter-market. Feel free to follow Ivan on Twitter& Youtube. Make sure you join our discord room if you'd like to interact with our team. Also, find out why Global Prime is the highest rated broker at Forex Peace Army.

    Quick Take

    The most heavily traded currencies (EUR, USD) remain on the backseat when it comes to its overall performance as commodity-linked currencies take commanding action to exploit the vulnerabilities in both the European and American counterparts. I'd say, there is a well-founded justification to keep pushing these currencies lower as the immediate risks suggest that the Fed is the next in line to bite the bullet and provide further easing measures, while the ECB may be one or two months behind. It is precisely for the same reasons that we find a suppressed USD that US equities are finding further buying interest at record highs. Easing by a Central Bank is the sugar hit buyers need, even if this time I wouldn't say is different, but rather I will only suggest that the rally defies certain logic. If history is any indication as to when an easing cycle occurs in the context of weakening growth as clearly seen via the depressed US 30-year bond yield, then this is not the ideal environment for equities overall, especially cyclical sectors. That said, let's keep moving on by highlighting one of the key triggers for the appreciation in the CAD today, which came courtesy of the first trade surplus in years, further illuminating traders that the Fed and the BoC may be headed, as the US-CA bond yield spread has been telegraphing for some time, in different directions. The AUD, with the RBA potentially affording to hold its record low-interest rate unchanged for a few months now that back-to-back cuts were delivered, is also finding solid buying, diverging dangerously from the Yuan. Lastly, the Japanese Yen and the Swiss Franc, unlike the price of Gold or US 30-year bond yields, tell us that investors have clearly reduced considerably the G20 hedges.

    [​IMG]

    Narratives In Financial Markets

    * The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
    • The S&P 500 keeps printing fresh record highs as a result, as counterintuitive as it may sound to the average Joe, of rather poor US data, which increases the odds of the FOMC going ahead with an insurance 25bp rate cut at the end of this month. According to the CME Fedwatch tool, the market assigns a 70% chance of a 25bp cut and 30% of a 50bp cut.
    • To recap, the US ADP data came weaker at 102K vs 140k expected. The US trade balance deficit widened to -55.5b vs 54.0b expected, a negative input for US q2 GDP trackers. The final US Markit PMI services index stood out at 51.5 from 50.7 expected, even if the levels it is printing near the lowest in over 3 years. The ISM non-manufacturing index for June was also weaker than expected at 55.1 vs 56.0 expected. To top it off, US factory orders came at -0.7%.
    • In a tweet, even if only reiterates what’s been known, US President Trump Trump accused China and Europe of currency manipulation. It read: “China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA. We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games - as they have for many years!”
    • US Economic Advisor Kudlow repeated that the White House will not lift the existing China tariffs during trade talks even if one of the conditions by China to return to the negotiations is for the US to remove the full amount of tariffs currently enacted. The performance in the US 30-year bond yield tells us not only that anticipation is for the Fed to ease, but no end in sight is seen in the messy trade talks between US and China as global growth weakness deepens.
    • Canada May trade balance overwhelms market expectations at +$0.76B vs -$1.70B expected. It’s quite a significant surprise since it’s the first surplus since Dec 2016. The drive in exports growth came via the automotive sector. The resumption of activities at some assembly plants after temporary shutdowns was partly to blame for the boost, Statistics Canada said.
    • UK June services PMI, once again, disappoints by printing 50.2 vs 51.0 expected. The eternal dragging of the Brexit issues is causing major uncertainty for businesses and investment intentions, which is clearly taking its toll on the economy during Q2. Markit: "The latest downturn has followed a gradual deterioration in demand over the past year as Brexit-related uncertainty has increasingly exacerbated the impact of a broader global economic slowdown.”
    • Trump shows discontent over Iran’s violation of the 2015 nuclear deal by exceeding its uranium stockpile limit. Trump tweet reads: “Iran was violating the 150 Billion Dollar (plus 1.8 Billion Dollar in CASH) Nuclear Deal with the United States, and others who paid NOTHING, long before I became President - and they have now breached their stockpile limit. Not good!”
    Recent Economic Indicators & Events Ahead

    If you are going to be trading on Thursday, be reminded that liquidity during the US session will be thinner than usual as US banks will be closed in observance of Independence Day. The inactivity by the majority of traders should lead to abnormally low volatility, even if it can be a double-edged sword to see higher volatility at times.

    [​IMG][​IMG]

    Source: Forexfactory

    RORO (Risk On, Risk Off Conditions)

    An eagle-eye view of some of the instruments most sensitive to risk sentiment tells us that the environment as we enter Thursday is characterized by the broad-based depreciation of the US Dollar as the equally-weighted currency index portrays. This weakness has been well capitalized by commodity currencies.

    A notorious outperformer in recent times is the CAD, with the AUD playing more catch up. The CAD not only saw positive fundamentals in the form of its first trade surplus in years, but the rise in US equities acted as an underpinning factor to keep the momentum going.

    The new lows in the US 30-year bond yield, not only suppresses the USD appeal further but it also tells us that the market clearly didn't find much justification to buying into the US-China trade truce agreement at the G20 as there is still no meat on the bone for traders to get to re-price a deal.

    The market remains fixated in global easing cycles to be dominant as the growth outlook deteriorates amid US protectionist policies. The rejection off highs in the JPY index communicates residual supply but with US yields so low, Yen sellers can only partially find an argument to be optimistic via rampant US equities.

    [​IMG]

    A Dive Into FX Majors (Techs, Funda, Intermarket)

    EUR/USD: Consolidation After 100% Projection Target


    When scanning through the daily chart, the back-to-back bearish rejections should be a source of concern for buyers, as it also should the fact that the 13-EMA (baseline) is being rejected. There are some positives to highlight though, such as the German-US bond yield spread surge seen, mainly led by the expectation of Fed cuts, as well as the bullish structure of higher highs and higher lows off the daily timeframe. Besides, the price has reached its 100% projection target, where it's paused. The volume is also tapering on the way down (US bank holiday today), which does not tend to be an encouraging signal for follow through as exhaustion becomes a risk.

    [​IMG][​IMG]

    GBP/USD: Looks Set to Test The Area Of 1.25


    At first glance, the Sterling looks like a currency poised to grab some liquidity at the area of 1.25 with the price structure very bearish below the 13-EMA (baseline). The test of the liquidity-rich area at the round number should find grateful buyers based on macro intermarket flows, but a very risky proposition judging by technicals. The advancement by sellers is on the tapering of volume but the fact that we are so close to retesting the previous lows, makes me think not many buyers may want to engage at present levels.

    [​IMG][​IMG]

    AUD/USD: Technically Bullish, Yuan Strength Not Supporting Run

    Technically, the Australian Dollar remains in a clear bullish path with no reason to turn bearish off the daily unless price action gives us some clues. The run higher is supported by the positive tone in equities as the S&P 500 breaks into fresh record highs, while the AU-US bond yield spread trades at rather neutral levels. The risk that I find for the Aussie to keep finding further follow through lies on the depreciation of the Yuan, the taper of volume on the way up and the strong resistance overhead.

    [​IMG][​IMG]

    USD/JPY: Bearish Structure, Intermarket Flows Limit Upside

    The pair remains bearish below the 13-EMA (baseline) with Wednesday's absorption candle on low volume communicating that some choppiness is likely in the next 24h as the interest to trade the pair fades, especially with the US bank holidays to see liquidity drying up. The rise in the S&P 500 has not acted as a key driver in the pair and I am not expecting much appreciation risk from here unless the bearish structure in the US 30-year bond yield or in the DXY start to turn around.

    [​IMG][​IMG]

    USD/CAD: Bond Yield Spread Takes Front Seat

    The Canadian Dollar has been the darling on the forex market for quite some time now. The overstretched move lowe has resulted in the pair reaching a critical projected target area around 1.3050, even if the very bearish NY close does not suggest sellers have had enough. The CA-US bond yield spread has put an enormous amount of pressure on the pair, as capital flows return to Canada in expectations that the Fed and the BoC monetary policy paths will start to diverge as Canada's upbeat data keeps justifying.

    [​IMG][​IMG]

    Important Footnotes
    • Risk model: The fact that financial markets have become so intertwined and dynamic makes it essential to stay constantly in tune with market conditions and adapt to new environments. This prop model will assist you to gauge the context that you are trading so that you can significantly reduce the downside risks. To understand the principles applied in the assessment of this model, refer to the tutorial How to Unpack Risk Sentiment Profiles
    • Cycles: Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of cycles, refer to the tutorial How To Read Market Structures In Forex
    • POC: It refers to the point of control. It represents the areas of most interest by trading volume and should act as walls of bids/offers that may result in price reversals. The volume profile analysis tracks trading activity over a specified time period at specified price levels. The study reveals the constant evolution of the market auction process. If you wish to find out more about the importance of the POC, refer to the tutorial How to Read Volume Profile Structures
    • Tick Volume: Price updates activity provides great insights into the actual buy or sell-side commitment to be engaged into a specific directional movement. Studies validate that price updates (tick volume) are highly correlated to actual traded volume, with the correlation being very high, when looking at hourly data. If you wish to find out more about the importance tick volume, refer to the tutorial on Why Is Tick Volume Important To Monitor?
    • Horizontal 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, the horizontal lines of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed and relevant to monitor. The Ultimate Guide To Identify Areas Of High Interest In Any Market
    • Trendlines: Besides the horizontal lines, trendlines are helpful as a visual representation of the trend. The trendlines are drawn respecting a series of rules that determine the validation of a new cycle being created. Therefore, these trendline drawn in the chart hinge to a certain interpretation of market structures.
    • Correlations: Each forex pair has a series of highly correlated assets to assess valuations. This type of study is called inter-market analysis and it involves scoping out anomalies in the ever-evolving global interconnectivity between equities, bonds, currencies, and commodities. If you would like to understand more about this concept, refer to the tutorial How Divergence In Correlated Assets Can Help You Add An Edge.
    • 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.
    • 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
     
  3. IvanGlobalPrime

    IvanGlobalPrime Private

    Joined:
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    Messages:
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    Find my latest market thoughts

    Fed's Powell Sticks To Dovish Script

    Powell’s statement was dominated by clear dovish connotations, reiterating that uncertainties continued to dim the US economic outlook due to trading concerns and a global economic slowdown.

    Fed’s Powell testimony in front of the House Financial Services Committee left almost no room for doubt that the Central Bank is setting the stage for a very well-telegraphed 25bp insurance cut on July 31st, as the CME Fedwatch tool indicates. Even chances of a 50bp cut, which looks like a far-fetched scenario even to Fed’s perma dovish member Bullard, has also gone up to 26%.

    [​IMG]

    If Powell had the intention to flip flop the intended easing action the Fed will embark upon this July on the heels of the strong US payrolls and the prevention of a radical escalation in the trade war via a half-hearted US-China trade truce at the G20, he would have done so. But Powell clearly didn't.

    Instead, Fed Chair Powell’s prepared statement was dominated by clear dovish connotations, reiterating that uncertainties since the June FOMC continued to dim the US economic outlook driven by trading concerns and a global economic slowdown. On the topic of the protracted low inflation we are seeing, Powell shifted into a higher gear of rhetoric intensity by warning that there is a risk weak inflation will be even more persistent than Fed currently anticipates.

    The market was re-emboldened by the fact that Powell had not interfered with the original dovish message from a few weeks’ time. There seems to be therefore little question on market participants’ minds now that Powell’s codewords “an ounce of prevention is worth a pound of cure” in the June FOMC should indeed be interpreted as an immediate insurance cut baked in the cake on the basis of US trade policy uncertainties, low inflation, slowdown in global growth, and risks of lower US economic activity.

    Additionally, Powell has clearly strengthened the case, in the market's view, for two more cuts thereafter at each of the following two meetings (Sep17-18 and Oct 29-30) for a cumulative of 75bp of easing for 2019. Below is a chart by Brent Donnelly, Spot FX Trader at HSBC, who touches on why the Fed is keeping a firm hand on its intention to ease.


    [​IMG]
    Source: HSBC

    Amid the avalanche of headlines by Powell, the FOMC June minutes did confirm what the market has already priced in and Powell’s testimony endorsed, which is that a July rate cut seems a done deal. One of the most clarifying headlines as part of the minutes could read that “many fed officials saw stronger rate cut case amid rising risks”, which again, is very consistent with the central dovish thematic that was revealed during today’s Fed Chair Powell testimony.

    After all said and done, and as the dust settled, the flurry of trading activity, as our equally weighted currency strength meter illustrates, led to Kiwi, Aussie, Euro and Swissy longs, in this order, to blare the trumpets by putting on the best performances, while the US Dollar was taken to the woodshed.

    The fact that the USD was unable to suck in the stampede of capital hitting the offer is a reflection of a more dovish-than-anticipated outcome. As a heads up, the reassurance that an easing cycle by the Fed is being cooked, alongside the relatively expensive USD if one accounts for today’s revelations, makes the USD a serious contender to see follow-through weakness into the second half of the week. Meanwhile, the Pound and the Yen, in aggregate terms, traded relatively idle.

    [​IMG]
    Stay on the watch for the Yen to struggle at these levels if stocks and bonds keep the ‘true risk on’ inertia. Opportunities to be a Yen seller on any intraday strength hold value. This view is supported by the notion that the JPY index printed a doji-type candle yet both the S&P 500 and US bonds communicate Yen is not an attractive vehicle to diversify into as Intermarket flows stand. This could translate in long opportunities in pairs the likes of AUD, NZD, CAD, EUR vs JPY during Thursday’s trading.

    [​IMG]

    A special mention deserves the Canadian Dollar, which proved for the zillion time to be stubbornly well-underpinned by market forces. The BoC meeting, overall, kept the door for further rate cuts temporarily sealed, with Governor Poloz noting that “until headwinds show signs of dissipating or worsen, we are content with today's setting of interest rates”. In a world of a race to the bottom when it comes to easing practices, this is a big deal! The initial selloff in the CAD to wipe out weak-long, as algos reacted to gloomier headlines the likes of “the outlook for the economy is clouded by persistent trade tensions, proved a flash in the pan nonetheless.

    The bearish engulfing bar on the USD/CAD embodies the defeat by USD longs and the control that the CAD continues to exert against the former, even if as I’ve pointed out this week, the Canadian currency has reached a monumental macro level of support at the 100% proj target. Still, if there is a driver that has the ability to keep the trend going, that’s the seldom episode we are seeing by which Fed and BoC policies are temporarily diverging in favor of the latter. The blue line in the chart below (US-CA 5y bond yield spread) depicts the ‘divergence’ story.

    [​IMG]

    But it wasn’t the only commanding engulfing candle in the charts. The one printed in the NZD/USD, breaking back above the 13-EMA baseline with an increase in volume, a NZ-US bond yield spread expanding to the upside, coupled with a bullish market structure, is a juicy signal to consider in order to capitalize on further USD weakness. An added plus is that the landscape of risk events faces the only hurdle of Thursday’s US CPI to potentially shift the tide, even if an upside surprise above +0.2% m/m, which is the outcome that may shake the ground in favor of sustained USD buy flows, doesn’t occur since Feb ‘18.


    [​IMG]

    A market riped to see further upside is Gold, which has played like no other expectations for a resumption of a global easing trend by Central Banks. The aggregated negative-yielding bonds around the globe have reached insane levels beyond $13 trillion, which has proven to be strongly synced with an increase in the appeal to hold the yellow metal. Moreover, since the Fed appears to be now leading the pack of Central Banks that will keep the ‘easing show’ going, closely followed by the ECB, taking the baton from the RBA, the plummeting of the nominal US yields alone is an added catalyst for Gold to do well across the board.


    [​IMG]

    Other than the USD, in the digital currency space, the testimony by Powell claimed a second victim. I am referring to Bitcoin as the price skid down from $13k over 1.5k on the way to create another dreadful bearish engulfing bar with the second largest sell-side volume seen since the bull run began.

    The euphoria in Bitcoin’s trend has been, by and large, invigorated further by Facebook’s plans to launch a global cryptocurrency (Libra). However, the positive buzz may be about to take a pause as the Fed chair said “Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability,” with the comments that followed even more blatantly obvious of the hurdles to be faced ahead by adding that the project “cannot go forward” without broad satisfaction with Facebook’s answers to regulators’ questions. The central bank has set up a “working group” to focus on these unanswered questions.


    [​IMG]

    Moving on, another pair of headlines I picked up on that must command a trader’s attention is the story carried by China’s South China Morning Post, where further revelations on the conversations US President Trump had with his counterpart Xi at the G20 came to the surface. It essentially boiled down to US President Trump repeatedly pressing Xi to commit to purchasing further US agricultural goods with Xi refusing to make specific commitment. Again, this is not a surprise as the trade truce is one that appears to be built on a house of cards ready to collapse. If it hasn’t yet is because its in both countries’ best interest to buy some time.

    Remember, White House Kudlow has taken a more lucid turn by finally admitting, in an interview via CNBC’s Capital Exchange, that the US and China may never reach a trade deal due to the difficulty in resolving the remaining issues, which as we know, revolt around technological transfers, intellectual property rights and accountability mechanisms. "When you get down to the last 10 percent, seven-yard line, it's tough," Kudlow said, referring to the negotiations.

    For the most optimistic bunch out there, still holding their breath hoping for a positive resolution, the White House, in an official statement, said that there had been a trade call between US and Chinese officials which was defined as constructive. The phone call included US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin, Chinese Vice Premier Liu He and Minister Zhong Shan. We shall see but looks like a long and arduous 10%.

    In the exotic category, I wanted to bring the reader’s attention to the USD/MXN, which this week saw yet again another test of a key horizontal level with a divergence on its intrinsic value line. Granted, Mexico's finance minister resignation on Tuesday over disagreements with regards to economic policy decisions happened to be the main driver overshooting price. But, as I succinctly explained in the following article (How Can The Yuan Help To Puzzle Together USD/MXN Value Trades?), a value-led trading approach when trading the Mexican Peso this year would have led to some incredible opportunities as the chart below demonstrates.


    [​IMG]

    Excerpt from the educational article I shared to clients earlier this week: “Once a retest of the area occurs (highlighted by a vertical line), ask yourself if a divergence with the value line is present from the first time the area was formed. That’s what I’ve highlighted in purple arrows in the chart. If so, this is a communication that the risk is for the pair to fade the breakout as Intermarket flows are not supporting the overall bias. Out of 10 trades that would have been entered, with the exception of trade 4, which overshot the resistance and may have led to a potential loss, the rest of retests were clear failures to enter a trade at a discount.

    I hope you found value in today’s decoding of the forex swings. Don’t forget that lining up next this Thursday is the ECB policy decision minutes, the US CPI readings and the second day of Fed Chair Powell testimony, this time in front of the Senate banking panel. Trade safe!
     
  4. IvanGlobalPrime

    IvanGlobalPrime Private

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    Risk Sentiment Thrives, US CPI Upbeat


    The recovery in the US inflation print, while it does not carry the substance necessary to shift the Fed’s narrative, it nonetheless makes the possibility of a 50bp rate, now priced at 21%, hard to imagine. The Fed will probably want to save further ammunition for months to come.

    The follow-through USD buying in the last Asian session, on the back of Fed’s Chair Powell cementing the case for a well-framed 25bp ‘insurance rate cut’ on July 31st, gave the impression that further pain was ahead for the world’s reserve currency this Thursday.

    Until the US CPI came about with a meritorious printing in core inflation terms, at 0.3% m/m, which happens to be the largest gain in over one and a half year. A positive trend in the USD through American hours then ensued as the market was caught wrong-footed.

    The recovery in the US inflation print, while it does not carry the substance necessary to shift the Fed’s narrative, it nonetheless makes the possibility of a 50bp rate, now priced at 21%, hard to imagine. Today’s print is the type of number that should solidify a precautionary approach in the Fed’s easing, read no 50bp rate cut, as it allows to buy time to gather further evidence on how the US economy fares the trade-related headwinds before using up further ammunition. The dual strong numbers in US payrolls and now core CPI, even if the relationship between inflation and unemployment is gone (Phillips curve theory), adds to the case.

    As a reminder, the Fed’s 2% inflation target mandate, takes into special consideration the core personal consumption expenditures (PCE) price index as their favored gauge to set policy. This particular measure did only increase by 1.5% y/y up to May, clearly undershooting its target. If further reassurance is needed that Powell won’t blink after today’s core CPI, this week he said: “there is a risk that weak inflation will be even more persistent than we currently anticipate.”

    The major pain in the neck for Fed’s Powell is, first and foremost, managing such an uncertain landscape amid the real prospect that a no trade deal with China entails for business confidence and the ripple effects it can create, until now, to a solid US economy.

    That's precisely why, the voice of the Fed, heard through a big line up of Fed members today, seemed to keep a consistent narrative that accommodation is coming.

    As part of Fed's Chair Powell testimony to the Senate today, the policymaker touched on the fact that businesses are starting to hold back on investment while adding that many of his colleagues in the Fed “have come to the view that a somewhat more accommodative policy may be appropriate.”
    Richmond Fed president Tom Barkin was the boldest by expressing the view that “if you decide to do something on rates, better to move faster than slower.” Meanwhile, Fed's Williams semantics were more akin to the central message Powell has aimed to deliver all along this week, with Williamd saying that “the current picture is complex, but the economy is still in a good place.”

    In the meantime, and shifting gears, the markets are slowly but surely coming to terms that the last 10% US economic adviser Kudlow was referring to, the final sticking points still to be agreed with China, is a bumpy road with neither China nor the US boasting optimism as things stand.
    From the US side, today’s daily fix by President Trump on Twitter, as always characterized by talk without mincing, notes that China is letting the US down by not buying agricultural products.

    [​IMG]

    China seems to also be calculating every move it makes in reference to trade talks with surgical precision, and Thursday’s comments via China's commerce ministry, were as lame as it gets, simply noting that both sides are working to implement consensus.

    Until proven wrong, the market has been behaving with skepticism ever since the trade truce, and so far there is devoid of details that makes one think there can be some breakthrough as both leaders can’t afford to show signs of weakness that may undermine their credibility.

    And if you thought the waters were not turbulent enough, Politico reports that U.S. officials are now pushing for sanctions on China over oil purchases from Iran.

    “China defied U.S. sanctions when it imported more than a million barrels of crude oil from Iran last month. But they are grappling with whether — and how — to hit back, according to three U.S. officials.”
    However, in the grand scheme of things, the US is still in a rather privileged position, not only sustaining a record-long economic recovery but with enough firepower to combat the risks of a slowdown. That ability to maneuver policy tool must sound like ancient times to the ECB, which fleshed out further evidence in today’s accounts of its June monetary policy meeting that show the governing council is finding broad-based consensus on the need to prepare for policy easing.

    In the case of the ECB, it looks like the timing to pull the trigger on more stimulatory policies could really come any months, including July. It really is a tricky one as some ECB observers argue to collect more evidence (Q2 GDP in August, ECB staff projections) before delivering more easing via a tentative 10bp rate cut in the deposit facility or a resumption of the QE program as immediate actions to stimulate the lackluster state of the EU. If history is any indication, and Draghi aims to be, as he’s done in the past, ahead of the curve, July is also a real possibility.
    Not that we needed more red flags to be raised about the precarious state of the Eurozone, but the IMF released an update saying that the single currency union faces a prolonged period of anemic growth and inflation, weighted by trade tensions, Brexit and Italy's piling debt.
    With regards to Brexit, I’ll touch briefly, just to update readers that based on a Guardian survey, it all seems to indicate that Boris Johnson will receive enough votes to win the PM runoff. The new Prime Minister is due to be announced on July 23. It’s all in wait-and-see mode for now.

    I won’t be leaving references to the UK yet, even if the next piece of news, is, as the paragraph above, hardly surprising. The Bank of England, as part of its latest financial stability report, reiterated that the risks to a global outlook deceleration have increased while warning that the perceived likelihood of no-deal Brexit has risen. It will all depend on how the process of Brexit negotiations plays out before the deadline by the end of October. What’s starting to have more rationale is a complete removal to any references to a hiking cycle and the introduction of gradual hints to ease, in line with the global trend seen, if headwinds prevail.

    Recent Economic Indicators & Events Ahead

    [​IMG] [​IMG]

    Source: Forexfactory

    A Dive Into The FX Charts

    The lay of the land in FX indicates a Euro index (equally-weighted vs seven other currencies) in no man’s land after finding a tremendous amount of buying interest at what I consider to be the most relevant area of support for years. If every time the EUR index came to test this line of support one shifted its bias to short-term EUR longs vs the weakest currencies at the time, the precision to enter around inflection points for price was second to none as the chart shows. Now, once again, buyers are looking to engineer enough buy-side pressure to move it away from it.

    [​IMG]

    With regards to the USD index, when cross-referenced vs seven currencies, it displays a bearish market structure with support found at the previous daily swing high. There is no reason to get overly bullish on the currency until more technical evidence is gathered. One could argue that on a micro scale the price is still on a short-term uptrend, but the descending trendline definitely caps the outlook at a more macro level.

    [​IMG]

    The JPY index has printed a bearish candle (pin bar), which tends to see follow-through continuation if the context is ripe for it. By analyzing intermarket flows and the current market structure, Thursday’s price action does suggest the risk for further downside is building. At the bare minimum, the dual rise in stocks and bonds in the US justifies a retest of the recent swing low.

    [​IMG]
    As I posted on Twitter earlier today, it does pay off to stay in constant sync with intermarket flows to avoid trading reactive but rather from a position where planning and anticipation take center stage. That’s why I encourage you to incorporate this branch of analysis with the JPY being the most intertwined currency when cross referenced to risk sentiment in the market.

    [​IMG]

    The commodity-linked currencies, meanwhile, continue to benefit from the risk-positive flows in the market, especially the AUD and NZD as both Central Banks (RBA, RBNZ) don’t seem to hold the imminent easing urgency as they had in the previous month. The CAD, with a rather neutral statement by the BOC on Wednesday, still retaining the guidance of rates on hold as warranted, is finding overpriced pockets of demand that keeps the currency underpinned.

    [​IMG] [​IMG] [​IMG]
    Lastly, the GBP remains in an unambiguous multi-month bearish trend, unable to retake its 13-ema baseline since May 7th, more than 2 months. The uncertainty over the Brexit process with the prospects of Boris Johnson as the next PM by the end of this month, and the ongoing economic weakness in the UK, have been the nail in the coffin to lack any love.

    [​IMG]
     
  5. IvanGlobalPrime

    IvanGlobalPrime Private

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    US Retail Sales Boosts USD Appeal


    The USD attracted steady buy-side flows as yet another piece of evidence via an upbeat US retail sales seems to suggest the upcoming one or two insurance rate cuts by the Fed may be the intended tactical move rather than a rate-cutting cycle.

    The Daily Edge is authored by Ivan Delgado, Market Insights Commentator at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth look of market dynamics, factoring in fundamentals, technicals, inter-market in order to determine daily biases and assist one’s decisions on a regular basis. Feel free to follow Ivan on Twitter & Youtube.

    Quick Take

    The USD attracted steady buy-side flows as yet another piece of evidence via an upbeat US retail sales seems to suggest the upcoming one or two insurance rate cuts by the Fed may be the intended tactical move rather than a rate-cutting cycle. This rationale would definitely gain a larger number of supporters at the helm of the Fed if the US data continues to show stable readings as it's been the case in recent times through the NFP, CPI or Retail Sales, all beating expectations. Amid the risk that the market has potentially overplayed the amount of easing the Fed is willing to pursue in the next year, Fed's Dallas President Kaplan made some revealing comments in what may look like an attempt to massage the thematic and downplay the aggressive easing priced in by emphasizing that a tactical adjustment rather than a rate-cutting cycle is what's needed. The outperformance of the USD comes in stark contrast with the price action witnessed in the Euro, finding an avalanche of sellers through Europe as the German ZEW is yet another reminder that the ECB may, after all, be inclined not to wait any further before initiating its new easing measures, judging by the state of demoralization in Germany's economic sentiment among the rest of EU-wide poor data. However, one can only imagine the true extent of discouragement to hold Sterlings when even against a pressured currency such as the Euro today, the latter still looks relatively strong vs the UK currency as the market comes to terms that a hard-exit of the EU type of scenario is where the Brexit process seems to be headed with the soon-to-be-elected new UK PM. Still, a lot of water to go under the bridge before the deadline time though. The CAD index, meanwhile, continues to struggle at a critical macro 100% projection level, with the collapse in oil prices on Iran-US potentially back to the drawing table a key driver weighing on the currency. On Tuesday, we also learned that the NZ CPI Q2 stood steady from the previous quarter, which may not be enough to prevent the RBNZ from embarking upon more rate cuts if it aims to bring inflation closer to the mid-range of its 2% target mandate. However, the market has so far shrugged off such eventuality by keeping the NZD relatively well bid. AUD traders also saw the RBA dampening expectations for further rate cuts short term after decoding Tuesday's July RBA minutes, with technicals in the AUD index, as in the case of the NZD index, still looking quite attractive. Lastly, a pair of currencies with erratic and non-directional price movements include the JPY and CHF indices, both trading around the 13-ema baselines, which clearly indicates a market that has taken a laxer approach towards supporting risk-off currencies yet not convinced to engage in protracted selling campaigns due to the evident risks that exist of slower global growth, trade uncertainties, hard-Brexit outlook to name the most pressing issues.

    [​IMG]

    Narratives In Financial Markets

    * The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
    • NZ CPI Q2 rose by 0.6%, bang on expectations. By deconstructing the report, fuel prices contributed to the upward pressure but the rest of the components were subdued. Annual inflation in NZ stays on the lower end of the RBNZ target range mandate. The Central Bank has in recent times that to take the inflation back up towards the 2% midpoint of the target, more robust economic growth is needed, which is unlikely to be fostered under the escalation in global growth uncertainties, hence the data does little to discourage the Reserve Bank that a lower OCR would be required to meet its objectives.
    • The July RBA minutes have cemented expectations that the RBA will most likely take a thoughtful pause by holding rates steady until later in the year, subject to upcoming data. By comparing the June vs July minutes, strong statements that would indicate a third rate cut is imminent were dumped from the minutes. To top it off, a revealing sentence included that “the Board will continue to monitor developments in the labor market closely, and adjust monetary policy if needed”. This condition wording indicates a pause.
    • Talk about a potential USD selling intervention by the US Treasury has gained some air time with several banks and institutions I’ve read taking note of the prospects. While such a measure would be consistent with Trump’s trade policy, and both Trump and Kudlow have had a go with some vague jawboning, there is still a long way to go. As HSBC notes: “Currency intervention usually has three phases: Start with verbal jabs and jawboning, then move to threats of physical intervention and then finally: Physical intervention. We are only in phase one of three (jawboning) and so it is too early to put on any straight line weaker dollar trades in anticipation.”
    • The incessant selling of the Sterling continues as the risks of a disorderly hard-Brexit is a real prospect that market participants are pricing in. The refusal to negotiate the Irish backstop by Boris Johnson and Jeremy Hunt (UK PM contenders), both stating that it will not be included in any negotiations with the European Union, has really hurt the Pound. The market is connecting the dots by anticipating that, with no further concessions from the EU on the horizon, the odds are increasing by the day, unless a major turn of events, that a hard-Brexit is a real possibility by the deadline set on October, 31st.
    • Oil sold off aggressively after tentative signs of an improvement in the US-Iran relationships. Both US Secretary of State Mike Pompeo and President Trump implied that a small window of opportunity might be opening up to make headway in the negotiations. Trump’s approach towards Iran was less critic by noting regime change is not on his agenda and that a lot of progress has been made as of late, while Pompeo said Iran is willing to talk about the potential shutdown of its missile program.
    • Germany’s July ZEW survey current situation was a very disappointing reading of -1.1 vs 5.0 expected, while expectations also fell further to -24.5 vs -22.0 expected. The nefarious reading, officially recording the weakest print in 9 years, may lead to tilt the balance towards an earlier rather than later initiation of the new ECB easing campaign. The data led to a substantial selling in the Euro even of bottom pickers emerged to keep the valuation in the EUR index by NY close far from the worst daily levels.
    • Following Trump’s tweets from Monday that China ‘needs’ a trade deal with the US, China’s foreign ministry has hit back by stating it is misleading to suggest that it needs a trade deal with the US. These comments, once again, portray how far apart both sides are from any deal. China even implies that rather than inking a half-baked deal, an alternative always available is to resort to stronger domestically-oriented stimulus policies. To make matters worse, Trump’s comments today are not helping, noting “he could impose more tariffs on China if he wanted”, adding that “we have a long way to go with China on trade.”
    • US June advance retail sales overshot estimates with a +0.4% print vs +0.2% expected. When looking at the internals, the control group rose by 0.7% vs +0.3% expected. Interestingly, while the data managed to see strong USD buying across the board, it barely dampened expectations that the Fed will only cut by 25bp on July 31st, with the odds for a 50bp rate cut at a generous 33% according to the CME Fedwatch tool. Note, the Fed’s rationale to adjust its rate lower in July is more about global growth, trade uncertainty, and business confidence, rather than consumption or jobs. Meanwhile, the small disappointment in the US June industrial production at 0.0% vs +0.1% expected barely budged the valuations in the USD. Utilities were the drag this time.
    • Bitcoin keeps selling off to the point of losing the 10k mark on a NY closing basis for the first time since June 20th. Last week’s Senate hearing on Libra or the negative rhetoric by policy-makers the likes of Trump or Mnuchin have taken its toll on sentiment. Crypto traders are coming to terms that the roadmap for the launch of Facebook’s Libra will have to face one stepping stone after another before getting the blessing of regulators.
    • Today’s intervention by Fed's Powell in a speech titled "Aspects of Monetary Policy in the Post-Crisis Era" at the French G7 Presidency 2019, in Paris, failed to yield new insights. The policymakers reiterated that the Fed will act as appropriate amid increased uncertainties. Powell re-visited the passages, as part of his speech, that more caution is warranted amid US growth down a notch and uncertainties around trade and global growth. The line that the FOMC "raised concerns about a more prolonged shortfall in inflation below our 2% target” was also repeated, suggesting that the Fed is turning laxer in accepting subdued inflation as the new norm.
    • Fed's Chicago President Evans - dovish member - said today that a 25 bps or 50 bps cut in July is a question of strategy, even if he is of the opinion that 50 basis points of accommodation are needed. Meanwhile, Fed's Dallas President Kaplan said he believes Fed funds rate will stabilize after one cut, essentially telling the market he is comfortable with one single cut. Of interest was the interview Kaplan conceded to Dow Jone, looking to massage his message as to imply that the tactical adjustment the Fed is after is one where one or two insurance cuts are needed rather than an easing cycle. "The persistence of the yield curve inversion "would make you consider at least a tactical adjustment-not a change in strategy, not the beginning of a rate-cutting cycle," he said.
    Recent Economic Indicators & Events Ahead

    [​IMG][​IMG]

    Source: Forexfactory

    A Dive Into The Charts (Techs, Funda, Intermarket)

    Right off the bat, what jumps at first glance through Tuesday’s price action is the solid appreciation of the USD, which finishes off in style by the NY close, supported by higher US nominal yields after the upbeat US retail sales. From an equally-weighted measure against G8 FX, the USD index performance communicates risks of follow-through demand based on the latest sequence of volume dynamics and technicals, which serve as our premise to set a directional bias.[​IMG]

    EUR/USD: Next 100% Proj Target Not Completed Yet

    [​IMG]

    GBP/USD: Sellers In Full Control As Hard-Brexit Prospects Priced In

    [​IMG]


    USD/JPY: Trendline Violation Shifts Focus To Stabler Price Action

    [​IMG]


    AUD/USD: Trendline Breakout On Increasing Vol Warrants Caution

    [​IMG]


    USD/CAD: Bullish Breakout To Encourage Dip-Buying, Canadian CPI Next Mover

    [​IMG]

    Important Footnotes
    • Risk model: The fact that financial markets have become so intertwined and dynamic makes it essential to stay constantly in tune with market conditions and adapt to new environments. This prop model will assist you to gauge the context that you are trading so that you can significantly reduce the downside risks. To understand the principles applied in the assessment of this model, refer to the tutorial How to Unpack Risk Sentiment Profiles
    • Cycles: Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of cycles, refer to the tutorial How To Read Market Structures In Forex
    • POC: It refers to the point of control. It represents the areas of most interest by trading volume and should act as walls of bids/offers that may result in price reversals. The volume profile analysis tracks trading activity over a specified time period at specified price levels. The study reveals the constant evolution of the market auction process. If you wish to find out more about the importance of the POC, refer to the tutorial How to Read Volume Profile Structures
    • Tick Volume: Price updates activity provides great insights into the actual buy or sell-side commitment to be engaged into a specific directional movement. Studies validate that price updates (tick volume) are highly correlated to actual traded volume, with the correlation being very high, when looking at hourly data. If you wish to find out more about the importance tick volume, refer to the tutorial on Why Is Tick Volume Important To Monitor?
    • Horizontal 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, the horizontal lines of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed and relevant to monitor. The Ultimate Guide To Identify Areas Of High Interest In Any Market
    • Trendlines: Besides the horizontal lines, trendlines are helpful as a visual representation of the trend. The trendlines are drawn respecting a series of rules that determine the validation of a new cycle being created. Therefore, these trendline drawn in the chart hinge to a certain interpretation of market structures.
    • Correlations: Each forex pair has a series of highly correlated assets to assess valuations. This type of study is called inter-market analysis and it involves scoping out anomalies in the ever-evolving global interconnectivity between equities, bonds, currencies, and commodities. If you would like to understand more about this concept, refer to the tutorial How Divergence In Correlated Assets Can Help You Add An Edge.
    • 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.
    • 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
     
  6. IvanGlobalPrime

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    Risk Off Dynamics, Low Vol FX Swings Prevail


    As one deconstructs the moves in the market, it becomes clear that there was a much higher degree of prudence all around. At the epicenter driving today's market movements, we find the standstill by the US and China to make progress in trade ties...

    The Daily Edge is authored by Ivan Delgado, Market Insights Commentator at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth look of market dynamics, factoring in fundamentals, technicals, inter-market in order to determine daily biases and assist one’s decisions on a regular basis. Feel free to follow Ivan on Twitter & Youtube.

    Quick Take

    It was a hostile day to be a risk-seeker, even if one would need to check the screens twice judging by the impressive run in the New Zealand Dollar, recently supported by a higher dairy auction but paradoxically, with the RBNZ potentially readying a rate cut in August. But I digress, as one deconstructs the moves in the market, it becomes clear that there was a much higher degree of prudence all around as the S&P 500 lost nearly 0.8%, long-dated US-30 year bond yield open Asia on Thursday 0.61% lower, Gold printed a bullish engulfing bar on the daily and Oil continues to find sellers even if we are back to square one in the US-Iran hopes to bridge differences after remarks by Iran's Foreign Minister. At the epicenter driving today's market movements, we find the standstill by the US and China to make progress in trade ties. An article published by the WSJ highlighting the difficulties to move forward with Huawei led to the over-supply in risk to worsen. Shifting gears, when analyzing FX moves on a merit basis today, the EUR index keeps whispering that the market is in no mood to amass the currency, as expectations keep building up that the ECB may have found enough evidence to wait no longer before it introduces its new stimulus program as soon as next week. The USD, meanwhile, saw a moderate retreat, but nothing major, with today's Fed speakers and the Fed Beige Book, reinforcing the notion that one or two insurance rate cuts are coming on the basis of 3 shaky pillars (global growth slowdown, trade uncertainty, low inflation). The JPY, as one would expect, attracted solid bids amid the shift to risk-off dynamics. The Swissy trod water, failing to attract the buying interest the Yen did. The Sterling, while it managed to stop the bloodbath in the last 24h, is still a currency with the most fragile macros, with banks such as Morgan Stanley calling for a 1-1.10 range as 'fair valuation' if a hard-Brexit ensues by the end of October. The CAD, meanwhile, has been trading for more than a week without the 'punch' it had us accustomed as a macro resistance in the index has been reached. Besides, intermarket flows, are far from ideal to be overly optimistic on the CAD heading into Thursday. Lastly, the AUD succumbed to risk-off by adjusting its valuation a tad lower even if the structure of the index is still of the most positive out there as the RBA will most likely take a pause in easing till Q4 at the bare minimum. Overall, the movements in Forex are still lagging way behind compared to the amount of vol experienced in equities or commodities.

    [​IMG]

    Narratives In Financial Markets

    * The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
    • Risk of ECB’s Draghi overdelivering: ECB governing council member, Benoit Coeure, reiterated its dovish stance by saying that the Central Bank is determined to act in case of adverse contingencies by adjusting all of its instruments as appropriate. On the outlook moving forward, Couere warned that evidence through economic data and surveys points for weaker growth in Q2, Q3 with risks tilted to the downside. The Euro has been out of love since late June, in a move that appears to be predicated by the anticipation that ECB’s Draghi may overdeliver by introducing a new stimulus program next week rather than simply adjusting the forward guidance to cut in September. Yesterday’s ill-fated German Zew survey only fortifies the immediate dovish expectations.
    • No love for the Pound: UK Brexit secretary, Stephen Barclay, spoke about his recent private meeting with EU chief Brexit negotiator, Michel Barnier, telling the press that there is a strong desire to avoid a no-deal Brexit, while also forewarning that the Irish backstop option was non-negotiable in an attempt to shift the focus towards what other alternative arrangements may exist. The news signifies no change from known events hence it’s unlikely to alter the negative mood in the Pound with the market gradually coming to a rude awakening that this time might be it for the UK to be headed towards a harder Brexit as it runs out of options on the basis that the two Conservative Party leadership contenders, Jeremy Hunt, and Boris Johnson, see an Irish backstop as ‘dead’. What this scenario creates is a very troublesome situation as the EU is unwilling to offer concessions.
    • US-China in a cul-de-sac road: According to US States Secretary of Commerce, Wilbur Ross, the US and China are expected to hold another trade call this week, which will have a bearing on whether or not an in-person meeting takes place. The preponderance of evidence since both countries announced a trade truce at the G20 to buy some time has proved rather uneventful in terms of any progress. If anything, comments from both sides do imply that the long list of disagreements remain unresolved, with provoking and out of place comments by Trump threatening to impose more tariffs on China if he wanted yesterday, not helping the case to build any optimism.
    • As China sticks to its guns: Global Times editor Hu Xijin, who has become a widely followed voice for the Communist party, said China is insistent on the three principles if a trade deal is to occur. These include the removal of all tariffs, realistic targets for China to buy US products and more equality in any future drafted trade agreement, which at this point, is a long distant prospect. Besides, with the latest US and Chinese data improving and the US equity market at all-time highs, the incentives for both sides to rush into any hasty decision as part of the negotiations is far from ideal.
    • True risk-off day as a result: The appreciation in the JPY index today, gunning through its baseline, comes as the dynamics shift to a short-term risk-off profile as depicted by the lower levels recorded in both US stocks and yields. The mood towards risk deteriorated significantly towards the close as a report in the Wall Street Journal did the rounds, noting that "talks with China had stalled while the Trump administration determines how to address Beijing’s demands that it ease restrictions on Huawei Technologies Co., according to people familiar with the talks." Easing expectations by the Fed have underpinned stocks (music to buyers' ears) but in the background, the thorny issue of China and the lack of progress in negotiations, at a time when stocks have recorded new historical highs, warrants caution.
    • IMF reminds us Fed has a say to reflate the global economy: As part of its annual External Sector Report released today, the IMF estimates the US dollar is 6-12% overvalued relative to US fundamentals, while the Yuan is at levels warranted by economic fundamentals. The overvaluation of the USD has become a hot topic, especially after jawboning by President Trump that a future (mid-term) intervention could be on the cards. One of the heavy-weight reasons for global disinflationary pressures to have prevailed is predicated on the lofty levels of the USD, and its impact on commodity prices, credit in EMs and the ability of USD-funded corporations to keep up its profitability levels. Since the Fed’s rationale to cut rates has shifted towards suppressed inflation, trade uncertainty, and global growth, it suggests it is within the Fed’s reach to now influence the USD levels if it so desires to stimulate the follow-through selling of USDs and incentivize renewed reflationary pressures.
    • Fed members keep a consistent message: San Francisco Federal Reserve Bank President Mary Daly, gave an interview via Reuters, sounding non-committal by reserving her judgment on the next interest rate call. Daly said she is not leaning one way or the other on July interest rate decision, adding that is too early to tell if the economy needs additional stimulus to get to above-trend growth. Interestingly, while she sticks to the script of other Fed members by not observing weakness in consumer spending or jobs, Daly recognizes a mixture of headwinds, including trade, mood, uncertainty, global slowdown, which is precisely the logic behind Fed’s Chair Powell guidance to justify an insurance cut(s).
    • Even Fed hawks respect unity in rhetoric: Fed's Kansas City President George, who is characterized by her upbeat remarks on policy, made comments today consistent with the rhetoric that a lower adjustment in rates is a possibility by stating that “trade, tariffs and global growth are risks to the US outlook”, and adding that “she is prepared to adjust her view of appropriate monetary policy should downside risks materialize.” Since that’s the line of reasoning for Powell to slash rates in July, the comments, in my view, reinforce the idea that the Fed is talking with cohesion and unity to telegraph one or two rate cuts, with the debate of one/two-and-done or an easing cycle to be data-dependent.
    • As does the Fed’s Beige Book: Today’s primary messages by the Fed's Beige Book are also congruous with a context that could warrant one or two rate cuts. The Beige Book highlighted that economic activity expanded at 'modest pace overall', and while the outlook 'generally was positive', widespread concerns about possible negative impacts of trade-related uncertainty were noticeable. Even on inflation, the remarks were in accordance with a laxer Fed, noting that price inflation was 'stable to down slightly' from the prior period, and even if firms generally saw higher input costs on labor and tariffs, the ability to pass them on to the end user was limited. One more piece of evidence that the Fed is talking with one voice in a united front setting up the stage for lower rates.
    • BOC won’t budge after today’s Canadian CPI: Canada’s June CPI y/y, as was the case in New Zealand yesterday, came bang on expectations at +2.0%, while the month-over-month was marginally better-than-feared at -0.2% vs -0.3% exp. As per the core measures, the median CPI printed 2.2% vs 2.1% exp, and the trimmed saw a minor retreat to 2.1% vs 2.2% exp. I can’t envision how this data may alter the current BOC stance, which remains on neutral territory even if alerted to adapt to rising uncertainties. Overall, the CAD put on a very decent performance despite a slump in Oil prices. The news that Canada was affirmed at AAA by Fitch with a stable outlook was a factor that may have contributed to the firm demand as well. Fitch referred to Canada's macro performance 'robust'.
    • Back to square one with Iran: Iran's Foreign Minister Zarif, in his comments today, essentially canceled much of the optimism that was hovering around the trading floors yesterday that the US and Iran may have struck a compromise that would allow them to at least return to the negotiating table. The reports yesterday suggested that Iran could be willing to negotiate its missile program, which led to an instant aggressive low adjustment in the price of Oil. However, even if the Oil price remains under pressure, Zarif’s comments that the US 'shot itself in the foot' by quitting the nuclear deal, are far from striking much consistency in Iran’s intention to negotiate.
    Recent Economic Indicators & Events Ahead

    [​IMG][​IMG]
    Source: Forexfactory

    A Dive Into The Charts (Tech, Funda, Intermarket)

    EUR/USD: Unfinished Business To The Downside

    [​IMG]

    GBP/USD: Don't Fight The Trend

    [​IMG]

    USD/JPY: Risk Builds For Lower Adjustments As Risk-Off Back

    [​IMG]


    AUD/USD: No Clear Bias After Single Volume Profile Distribution

    [​IMG]


    USD/CAD: Value To Buy On Weakness Out Of Question

    [​IMG]


    Gold: Buying Frenzy Creates Daily Engulfing Candle

    [​IMG]

    Important Footnotes
    • Risk model: The fact that financial markets have become so intertwined and dynamic makes it essential to stay constantly in tune with market conditions and adapt to new environments. This prop model will assist you to gauge the context that you are trading so that you can significantly reduce the downside risks. To understand the principles applied in the assessment of this model, refer to the tutorial How to Unpack Risk Sentiment Profiles
    • Cycles: Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of cycles, refer to the tutorial How To Read Market Structures In Forex
    • POC: It refers to the point of control. It represents the areas of most interest by trading volume and should act as walls of bids/offers that may result in price reversals. The volume profile analysis tracks trading activity over a specified time period at specified price levels. The study reveals the constant evolution of the market auction process. If you wish to find out more about the importance of the POC, refer to the tutorial How to Read Volume Profile Structures
    • Tick Volume: Price updates activity provides great insights into the actual buy or sell-side commitment to be engaged into a specific directional movement. Studies validate that price updates (tick volume) are highly correlated to actual traded volume, with the correlation being very high, when looking at hourly data. If you wish to find out more about the importance tick volume, refer to the tutorial on Why Is Tick Volume Important To Monitor?
    • Horizontal 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, the horizontal lines of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed and relevant to monitor. The Ultimate Guide To Identify Areas Of High Interest In Any Market
    • Trendlines: Besides the horizontal lines, trendlines are helpful as a visual representation of the trend. The trendlines are drawn respecting a series of rules that determine the validation of a new cycle being created. Therefore, these trendline drawn in the chart hinge to a certain interpretation of market structures.
    • Correlations: Each forex pair has a series of highly correlated assets to assess valuations. This type of study is called inter-market analysis and it involves scoping out anomalies in the ever-evolving global interconnectivity between equities, bonds, currencies, and commodities. If you would like to understand more about this concept, refer to the tutorial How Divergence In Correlated Assets Can Help You Add An Edge.
    • 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.
    • 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
     
  7. IvanGlobalPrime

    IvanGlobalPrime Private

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    Find my latest market thoughts

    A Market Rethink on Fed's Dovish Ambition Sinks the Dollar


    The Daily Edge is authored by Ivan Delgado, Market Insights Commentator at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth look of market dynamics, factoring in fundamentals, technicals, inter-market in order to determine daily biases and assist one’s decisions on a regular basis. Feel free to follow Ivan on Twitter & Youtube.

    Quick Take

    Thursday's price action was characterized by a USD-centric selloff across the board after Fed’s Vice-Chair and NY Fed President Williams intensified his dovish rhetoric right before the Fed goes dark until the FOMC on July 31st. The market took his comments by heart, even if he later tried to play them down by saying today's speech was not about potential policy actions to be conducted this month, and while the USD recouped a significant portion of its US-led losses, judging by the CME Fedwatch pricing of a 50bp rate cut, last at 48% from as high as 71% a few hours later (yesterday stood at 32%), the market verdict still seems to suggest the conviction for an aggressive Fed cut is on the rise. The Euro was also knocked down against its main peers, as a report made the rounds that, in an unprecedented move, the ECB may be considering to revise its inflation goal mandate, in a sign that the Central Bank may have to resort to more stimulus for longer amid the puzzling phenomenon of low global inflation. On the flip side, the Sterling finally celebrated a positive day, and it wasn't just a mere gain, but the largest posted in the month of July, as the UK parliament passed the Benn amendment that will block a Sept-Oct parliament shutdown in case the new UK PM had the perilous audacity of strategizing with a hard-Brexit by running out of time. The Kiwi and the Aussie, the latter boosted by the reassurance provided by today's Aus jobs that the RBA will stay pat for a few months on rates, put on another solid performance. The same cannot be said about the Canadian Dollar, suffering an imbalance of supply as the market plays the divergence trade against intermarket flows as warned in yesterday's report. Lastly, both the Yen and the Swissy trod water once again by trading generally flat from an equally-weighted performance view, hence capitalizing only against the weakest (EUR, USD, CAD).

    [​IMG]

    Narratives In Financial Markets

    * The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
    Fed's Williams goes beyond previous dovish remarks: Fed’s Vice-Chair and NY Fed President Williams made some clear dovish comments on Thursday, very consistent with the message carried by Fed’s Chair Powell and other Fed speakers during the month of July. The comments have shifted the focus back towards a more aggressive easing of 50bp in July, with the USD plummeting as a result. The sharp markdown in the US Dollar is predicated on the basis that today’s remarks were even more dovish than his prior comments on July 11th, and the fact that he made it right before what’s referred to as the dark period, which takes effect from Friday at the end of NY trading until July 31st, hence the comments one would think were intended to clearly send a message of where the Fed stands.
    This is what Fed's Williams shared in today's speech: The policymaker said “it is better to take a preventative approach than to wait for disaster”, reminiscence of Powell’s word code “an ounce of prevention is worth a pound of cure” in the last FOMC. Williams reinforced his dovishness by noting “research shows that when neutral rates are low you should not keep your powder dry”, adding that “long-term forces lowering neutral rates set to linger.” Williams currently estimates neutral rates in the US to be around 0.5% and that inflation expectations are far more anchored these days (dovish). The headlines have cemented the case for the Fed to cut its interest rate by 50bp this month, as reflected by the whopping 71% chance assigned by the CME Fedwatch tool. Note: New York Fed Williams later on the day added his speech was not about potential policy actions at the July FOMC meeting, which has sent the USD back up again, recouping part of its losses.
    Fed's Clarida joins the Fed's dovish party: If not sufficient evidence of the consistent easing message projected by Fed members since the last FOMC, today’s intervention by Federal Reserve Vice Chairman Richard Clarida should make it blatantly obvious as the policymaker outlined that the US economy is in a good place but uncertainties that may influence the US growth have increased, adding that global data is disappointing and inflation soft. Again, these are the exact same risks identified by Powell and other members to justify a preventive adjustment of rates lower. Clarida also hinted that since monetary policy operates with a lag, risks must be accounted for before data turns (too late).
    Moment of reckoning for the ECB inflation mandate? In a report carried by Bloomberg, it was revealed that the ECB is considering to study a potential revamp of its inflation goal framework, with some of the ECB staff seemingly critics of the 'below, but close to 2%' definition as part of the mandate in what’s still a confidential and preliminary work. The immediate reaction by the market was to mark down the Euro as a school of thought is that by potentially being laxer on the doctrine that surrounds the mythical 2% inflation goal, the Central Bank makes the admission to potentially pursue longer stimulus programs based on the acceptance of lower inflation projections. The post-crisis era has proven to defy old established theories such as the Philip curve, with the preponderance of evidence proving that the relationship between unemployment and inflation is an obsolete approach to influence policy. Interestingly, the Fed has also recognized in the last few weeks the risk of low inflation for longer and its willingness to accept this reality, in what appears to be a coordinated effort to re-evaluate and adjust inflation targets in accordance with the new paradigms, which for now is seen as the recognition that in a world of ultra-low inflation, accommodative policies should be dominant with a much lower USD a tool the Fed may utilize to re-activate the reflationary environment through higher commodity prices, friendlier credit conditions in EMs and the ability of USD-funded corporations to keep up its profitability levels elevated.
    Concessions by the EU on Brexit an illusion: EU's chief Brexit negotiator Barnier, time and time again, reiterates that there will be no renegotiation of the Brexit withdrawal agreement, which narrows down the possible outcomes to either a no-deal Brexit, a general election or second referendum. The hard-line position on the Irish border by the contenders to the post of UK PM (Boris Johnson and Hunt) make the option of renegotiation with the EU dead in the water. Nonetheless, as a bona fide gesture that may be interpreted as a slight positive input, the door was left open should UK politicians have a rethink and consider an alternative arrangement for the Irish border.
    UK retail sales an outlier but Brexit dominates: While UK economic data has turned largely into a sideshow fully eclipsed by the Brexit conundrum, today’s UK June retail sales at +1.0% vs -0.3% m/m expected is certainly an outlier fueling the GBP rally. Growth in non-food stores and second-hand goods led the upbeat print, while food stores and department store sales were, in contrast, the negative inputs. Do not expect the data to alter the outlook for the GBP nor the BoE to budge as Brexit is what matters.
    Shutting down parliament won't fly: The positive buy-side flows in the Sterling today were mostly driven by the Benn amendment in the UK parliament, aimed to prevent a Sept-Oct parliament shutdown with a vote of 315-274. Even if the new UK PM were to suspend sessions in the parliament in Sept and Oct, members of the commons would still be required to attend, which would make any effort to strategize a no-deal Brexit due to running out of time a no go. At the margin, it was a GBP positive as it allows more room for the UK government to agree on a compromise, which may include a general election, second referendum or the least likely, a renegotiation of the existing deal.

    RBA can afford to wait for further cuts: Today’s Australian Employment Change for the month of June passed the test even if the headline number missed expectations by coming at +0.5K vs +9.0K expected, with the unemployment rate unchanged at 5.2%. As one digs deeper into the details, full-time employment rose by 21.1K, part-time declined by -20.6K, and the participation rate came at 66.0%, a tad higher than the 65.9% expected. To brightens things up down under, Australia’s NAB quarterly business confidence survey for Q2 came at 6 vs -1 prior, while on the flip side, business conditions, which accounts for trade, sales, profitability, and employment, weakened further to +1. Since the Reserve Bank of Australia has defined the logic of its easing bias on the developments in the labor market, today’s data, on balance, should support the notion that the RBA can afford a degree of patience till considering further easing sometime in Q4.
    BoK cuts rates as global easing carries on: In what should be seen as a symbolic move of the shift towards a global easing bias, today it was the time for the Bank of South Korea to slash the key rate to 1.50% from 1.75%, citing that economic developments have been worsening along with signs that the easing will continue.
    Philly Fed sees snap back up: In terms of economic data in the North American session, the US June Philly Fed saw yet another solid print of +21.8 vs +5.0 expected, highest in 1 year, with new orders soaring to +18.9 vs +8.3 prior, as did the employment component at +30.0 vs +15.4 prior. US unemployment claims came flat and the CB leading index disappointed. Meanwhile, the ADP Canada June employment recorded strong gains too, at +30.4K vs -16.0K prior, even if the prior month data was revised sharply lower from -16.0K to -36.7K, which essentially puts the net for the last 2 months at -6.3k. A second-tier data unlikely to influence the BoC at this stage.
    Oil faces further pressure, Iran opens door to renegotiate: The pendulum in Iran’s willingness to return to the negotiating table with the US has been swinging left and right without much congruence this week. However, today’s comments came right from the horse’s mouth. The Iranian President Rouhani said Iran is determined to leave the doors open to save the nuclear deal after a telephone call with France's Macron. Besides, the Iranian foreign minister, Mohammad Javad Zarif, on a visit to New York, offered a return to the nuclear deal accepting enhanced inspections of its nuclear programme in return for the permanent lifting of US sanctions, even if Trump has made it clear Iran must cease the enrichment of uranium enrichment and support for proxies and allies in the region. The price of Oil kept its ill-fated week by dropping over 3% as traders price in chances of a reconciliation.

    Recent Economic Indicators & Events Ahead

    [​IMG]

    Source: Forexfactory

    A Dive Into The Charts (Tech, Funda, Intermarket)

    EUR/USD: Offers Absorb Buy-Side Pressure At Confluence Of Resistances

    [​IMG]

    GBP/USD: The Sterling Boosted By Mixture Of Brexit, Fed Headlines

    [​IMG]

    USD/JPY: Successful Rotation Puts Sellers Firmly In Control

    [​IMG]


    AUD/USD: Breakout On High Volume After Fed's Williams

    [​IMG]


    Important Footnotes

    • Risk model: The fact that financial markets have become so intertwined and dynamic makes it essential to stay constantly in tune with market conditions and adapt to new environments. This prop model will assist you to gauge the context that you are trading so that you can significantly reduce the downside risks. To understand the principles applied in the assessment of this model, refer to the tutorial How to Unpack Risk Sentiment Profiles
    • Cycles: Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of cycles, refer to the tutorial How To Read Market Structures In Forex
    • POC: It refers to the point of control. It represents the areas of most interest by trading volume and should act as walls of bids/offers that may result in price reversals. The volume profile analysis tracks trading activity over a specified time period at specified price levels. The study reveals the constant evolution of the market auction process. If you wish to find out more about the importance of the POC, refer to the tutorial How to Read Volume Profile Structures
    • Tick Volume: Price updates activity provides great insights into the actual buy or sell-side commitment to be engaged into a specific directional movement. Studies validate that price updates (tick volume) are highly correlated to actual traded volume, with the correlation being very high, when looking at hourly data. If you wish to find out more about the importance tick volume, refer to the tutorial on Why Is Tick Volume Important To Monitor?
    • Horizontal 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, the horizontal lines of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed and relevant to monitor. The Ultimate Guide To Identify Areas Of High Interest In Any Market
    • Trendlines: Besides the horizontal lines, trendlines are helpful as a visual representation of the trend. The trendlines are drawn respecting a series of rules that determine the validation of a new cycle being created. Therefore, these trendline drawn in the chart hinge to a certain interpretation of market structures.
    • Correlations: Each forex pair has a series of highly correlated assets to assess valuations. This type of study is called inter-market analysis and it involves scoping out anomalies in the ever-evolving global interconnectivity between equities, bonds, currencies, and commodities. If you would like to understand more about this concept, refer to the tutorial How Divergence In Correlated Assets Can Help You Add An Edge.
    • 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.
    • 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
     

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