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IvanGlobalPrime

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Risk Buoyancy Hinges On US Fiscal Bill

Time of the essence to get a US fiscal bill passed through the Senate. Equities recorded back to back gains as the USD gave back another tiny portion of its mammoth-size appreciation. The cuprit is the anticipation that US politicians will come together to approve a $2trn fiscal package . The risk is not so much on the actual passing of the bill but rather on further delays...

The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics - fundamentals and technicals - determine daily biases and assist one’s trading decisions.

Let’s get started…


Quick Take

Risk continues to be buoyed as the market keeps pricing in what appears to be an imminent approval by the US Senate of a huge $2 trn covid-19 relief bill. The equities in the US, which acts as a barometer of risk, recorded back to back gains, even if the rally was far from impressive as after a 5%+ rally, the S&P gave up over 80% of the gains. In the currency market, with volatility stabilizing between 4 to 5 times what we were used to pre-COVID19, the Canadian Dollar was the outperformer, the Sterling went nuts by trading in a wild 300 pips range all over the place, while the USD continues to weaken from grossly overextended levels. The gap in performance between the world’s reserve currency and any other currency since the onset of the ‘liquidity event’ has been impressive to say the least. The dislocations in the market, forced selling on margin calls amid sky-high vols led to an epic scramble towards cash. The Oceanic currencies, especially the AUD, were once again pressured and much of the ability to find a stronger footing lies on risk sentiment and the US bill to pass the Senate without further delays. This is precisely the next driver today, whether or not risk can be thrown another lifeline or instead politicians decide to throw a curveball with further delays in this much-needed action.



The indices show the performance of a particular currency vs G8 FX. An educational video on how to interpret these indices can be found in the Global Prime's Research section. If you found the content in this section valuable, give us a share by just clicking here!

Narratives In Financial Markets

* The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Twitter, Institutional Bank Research reports. If you found this fundamental summary helpful, just click here to share it!
Time of the essence to get US fiscal bill passed: Equities in the US recorded a second straight day of gains after the largest one-day rise in the Dow Jones the previous day since 1933. The equity market’s performance now hinges on the ability of US politicians to finally agree on a $2trn fiscal package with some signs that Congress is not yet all in (vote ongoing) and has hit an impasse on the final approval of the bill. The risk is not so much on the actual passing of the bill but rather on further delays, which may put renewed pressure on equities.

USD keeps weakening from sky-high levels: Amid the more groovy vibes in equities and as fixed income finds stabilization after the unprecedented volatility seen, the USD extended its decline across the board. The infinite amounts of assets the Fed is committed to buy alongside the US fiscal bill has so far moved the needle, at a marginal level, to reduce the appeal towards the currency. It’s the first time since the virus crisis went haywire globally that the USD has recorded back to back losses, which correlates with the first back to back gains in US equities.

What’s the latest on COVID19? As part of the ongoing COVID-19 global crisis, numbers of deads have now surpassed the 20k mark at a time when the focus remains on the spread of contagion in the US, UK and Australia as countries where the lockdown measures came with delay. The situation in Italy appears to be stabilizing as the death toll is slowly flattening, while Spain’s exponential growth curve is still in ascend. Meanwhile, Trump keeps pushing the narrative that the economic repercussions of an extended lockdown may be worse than the remedy, at a time when the WHO warns against lifting the lockdowns too early as the pandemic intensifies.

US Jobless claims the big release today: We should brace for a staggering US jobless claims figures today, likely to shock the unprepared, with economists talking about a ‘nuts’ range of 1-3 million Americans to have filed for claims insurance. This is the type of headline that when confirmed (Wednesday), may shock markets, as warned earlier this week.

GBP remains hugely volatile: The currency moed up and down in a big 3 figure range and is hard to rationalize what’s really causing the wild movements. One line of thought is that the UK continues to be way behind the curve in its measures, compared to other countries, to mitigate a nationwide COVID-19 contagion. Johnson imposed a nationwide lockdown by which it has collectively shut down cafes, pubs, bars and restaurants, while the finance minister recently announced that the government would pay 80% of wages for employees unable to work — up to 2,500 pounds/month. All the latest about the virus in the UK can be found via the Guardian.

The Canadian dollar was the outperformer: One reason being attributed to the one-sided buying flows includes the measures by the government to fund households by paying $2000/month to people who lost their jobs. News that the hardest hit oil companies would receive financial assistance from the government, alongside the overall risk appetite, were also positive developments aiding the ride higher in the Canadian Dollar.

Potential Oil storage crisis brewing: This is a new threat to OPEC as the combined demand/supply shock due to COVID-19, alongside the all-out price war, has led to very cheap prices for crude oil as Saudi Arabia and Russia ramp up production to the boots. As Reuters notes, “there are 7.7 billion barrels of onshore storage capacity globally, according to analysts at Rystad Energy. Right now, more than three-quarters of that storage space is already being used…” But it gets worse as Reuters elaborates in the following article.

EU prepares credit lines: As Bloomberg reports, “the EU is preparing to make available credit lines from its bailout fund worth up to 2% of each country’s output…” as part of joint action to complement the individual national stimulus measures. According to a draft statement seen by Bloomberg, EU leaders are negotiating ESM credit lines, set to be finalised by next week. The credit lines would be derived off the European Stability Mechanism (ESM), a fund intended for emergency loans to Eurozone countries at risk of a collapse. The option most viable to finance it appears to be 'coronabonds' - combined securities from different EU countries -.

Germany approved fiscal bill: The eye-popping 750bln euro crisis package was given the green light, which will ease pressure on those smaller/mid mid size firms and the self-employed. By any measures, the numbers are huge. As Forexlive notes, “Germany's GDP is one-fifth of the US which just unveiled an enormous $2 trillion package. In relative terms, this is much bigger.”
Recent Economic Indicators & Events Ahead



Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that can display data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!
Insights Into Forex Flows

The indices show the performance of a particular currency vs G8 FX. An educational video on how to interpret these indices can be found in the Global Prime's Research section. The idea of this analysis is to complement one’s daily bias so that traders can make better and smarter decisions by accounting for the aggregation of flows.

If you found the content in this section valuable, give us a share by just clicking here!

Quick review weekly FX flows: The overall volatility in the Forex market continues to decrease from greatly inflated level, which in the case of the EUR or USD, it recently hit a spike of over 1,000% above its pre-COVID19 levels, which was of course unsustainable. By scanning through most of the indices, it appears as though currencies are trading at an interval of 3 to 5 times the pre-COVID19 volatility on average. What this means is that if during the depressed vol era the EUR/USD would be trapped in a 40-50 pips range, it now displays, on average, a range that is 4 to 6 times wider, in other words, between a minimum of 160 and 250 pips. This same example can be extrapolated to most currencies. The Pound remains very volatile in the context of a bearish trend, with vol still running in the highs 300% from normal levels. To put things into perspective as to how ‘mind boggling’ the run in the USD has been, at its peak, the currency netted an increase in volatility of 1,600% from its pre-COID19 crisis levels. This is the type of ramification when the global financial markets go haywire in a classic ‘liquidity event’. The CAD still maintains a bearish outlook technically-wise with the 50% retracement a tough nut to crack, even if the currency keeps showing big resilience as of late. The Yen still looks promising for longs structurally as it just recently filled its early March up-gap with vol still running rampant, in the case of the Yen, around 400% above levels recorded earlier in 2020 before COVID19 went global and markets started to panic. The same story applies to the Swissy. Lastly, the outlook on the AUD and NZD remains overall bearish with vol stabilizing near the 200% increment mark.

Let’s now get started with a look at every index…




Important Footnotes
  • Market structure: Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of cycles, refer to the tutorial How To Read Market Structures In Forex
  • 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
  • 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
 

IvanGlobalPrime

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USD Has Huge Weekly Decline


The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube. The purpose of this content is to taking an in-depth look at market dynamics – fundamentals and technicals – to determine daily biases and assist one’s trading decisions.

Let’s get started…

Quick Take

Shorting the US Dollar has been without a doubt the best play over the last week as the Fed inundated the market with a new level of liquidity/funding capacity. The signing of the $2trn stimulus package by Trump, while not aiding stocks in the last 24h, has nonetheless alleviated the near-term economic stresses in the US. But it’s month-end books’ re-balancing that the Global FX Committee (GFXS) is warning us to be vigilant for the next 2 days, as “FX market participants may execute larger than usual FX volumes during end-of-month benchmark fixings.” The late weakness in the USD out of the blue in the last US session after a promising start shows how it all can turn on a dime in the blink of an eye. The currencies are flows’ driven, especially as Q1 ends, and prove of that is the out-performance of a Pound despite in the UK, PM Boris Johnson and Health Secretary Matt Hancock both tested positive for COVID-19, while at the same time, Fitch downgraded the UK’s credit rating to AA- with the outlook negative. The Oceanic currencies also did well last Friday even as equities and bond yields dropped. The CAD was a big mover last Friday too, as the BOC exhausts its ammunition by announcing an extra 5-bp rate cut and the introduction of QE as part of another emergency meeting. The Yen, Euro and Swiss Franc, the 3 funding currencies and poster children of the now terminated era of ‘long carry structures’ went through balanced flows on Friday.



The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.

Narratives In Financial Markets

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

If you found this summary helpful, just click here to share it!
Trump signed off $2trn stimulus package: It happened last Friday following the approval by Congress to pass the historic bill to stem the fallout of the US economy. This package is designed to keep the country above water but far from reactivating the economy.

Equities end the week on a soft note: Equities finished the week giving back the majority of Thursday’s gains as the correction lasting 3 days lost steam. Judging by the level of the VIX at 65.00, high volatility is going to stay very elevated and “demand for cash should remain high as large parts of the US economy will remain closed”, an investor quoted by the FT said.

Safe-haven in demand: The lowering of global bond yields on Friday, including in the US, as equities sold off, was a recipe to see instruments with safe-haven attributes (Yen, gold) in high demand on Friday. The rise in these asset classes is supported by the near term USD weakness.

AUD, NZD rallies not aided by Friday’s context: The Oceanic currencies had a bullish run that based on risk metrics looks unsustainable and shows the bearings that month-end rebalancing may have had causing the disjointed moves. It’s hard to justify a sustained AUD, NZD rally when order flow is ‘true risk off’ as seen on Friday.

GBP outperforms: To further make a point that markets don’t make much sense based on the rapid evolution of fundamentals, the GBP was the outperformer during Friday despite in the UK, PM Boris Johnson and Health Secretary Matt Hancock both tested positive for COVID-19, while at the same time, Fitch downgraded the UK’s credit rating to AA- with the outlook negative.

USD under the cosh: Last week, the USD index (I monitor the equally-distributed measure vs G8 FX) suffered the largest weekly fall that I can remember as far as data goes. However, this depreciation in the currency, triggered by the flooding of USD into the system, still occurs in the context of an unfolding structural bullish breakout as underscored in this YT video.

Watch month-end benchmark fixings: The Global FX Committee (GFXS) issued a statement late last week, still applicable for the next 2 days, in which it warns: “Given the intense volatility seen in global financial markets this month, it is possible that FX market participants may execute larger than usual FX volumes during end-of-month benchmark fixings.”

BOC cuts and starts QE: In another emergency meeting by a Central Bank, and I’ve lost count how many we’ve had since the unraveling of the COVID-19 crisis into ‘full blown’ state, the Bank of Canada decided to cut its rates by 50bps to 0.25% and announced QE for the first time.

Oil market in a state of disarray: It trades at a 17-year low as the key players causing the historic price war (Russia & Saudi Arabia) show no interest in returning to the drawing table. Last Friday, I warned traders that the outlook looks grim as the G20 meeting concluded on Thursday made no mention of oil nor energy, in a clear sign that positions are far apart.

Worrying signs of deep political cracks in the EU: The messages of cohesion and solidarity the European Union should project are lacking as Italy gets into murky waters questioning the very existence of the EU amid the lack of camaraderie and financial assistance from the European block. France and Spain also joined forces supporting the idea of a large joint EU effort through ‘corona bonds’, which met the fierce opposition of the Dutch and Germans.

The US focal point for markets: The fluid situation on the COVID-19 numbers continues to be disaportionaly bleak, with the Western Hemisphere going through the darkest times compared to the far east (Italy and Spain numbers show the deadliest days yet). Most of the focus in coming weeks will be in the US as the death toll keeps escalating rapidly. The trend is that an increasing number of countries are going into ‘hibernation’ as economies get paralyzed.

Grim outlook by US expert in the matter: As the U.S. becomes the first country to reach 100k coronavirus cases, the latest projections by Dr. Fauci, the director of the National Institute of Allergy and Infectious Diseases and a member of the White House coronavirus task, suggest the coronavirus will infect millions of Americans and could kill between 100,000 to 200,000.

Must-watch video by South Korean top scientist: The highest-ranked scientist in infectious diseases out of South Korea, a country praised for the successful tackling of COVID19, gave a rare interview with English subtitles. I recommend watching it from minute 30. In it, Professor Kim Woo-joo from the Korea University Guro Hospital, warns that the world must brace itself for 18 months of no prospects for a vaccine and even when available, it’s hard to see how it can be made available for the majority. This video interview is a cruel reality check. His hope in the near term, he mentions, is drug repurposing.
Economic data to play a secondary role: Remember that with economic data so hard to forecast in these unprecedented times, the market will continue to take guidance off COVID-19 count curve with the worst yet to come in countries slow to react like the UK and the US. This means that data will remain on the backseat and is very unlikely to be, in the grand scheme of things, a key driver. It therefore implies that this week’s US ISM PMI and payrolls should have little bearings vs the real data that matters.

Recent Economic Indicators & Events Ahead


Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!

Insights Into Forex Majors

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.

If you found the content valuable, give us a share by just clicking here! Besides, if you have a suggestion on extra instruments for me to cover, reach out to me via Twitter.

EUR/USD technical analysis
  • Volatility: It remains very high, 1 full standard deviation above an increasing 100-ma (seen as the new normal vol) of about 100 pips. In other words, swings worth over 200 pips has become the norm in the currency pair. The prospects for vol to stay elevated are quite high as month-end rebalancing will be specially impactful.
  • Price structure: The weekly chart rules here as it printed a successful rotation off the highs, suggesting that the rally faces the risk of being capped by the 1.1175-1.1250 mark, which would correspond with a right hand shoulder carved out.
  • Momentum: As the smart money tracker indicates, the latest order flow is supportive of further upside momentum in both the daily and the 4-hour chart, but this collides with the technical restrictions off the weekly as pointed above.
  • Key levels: To the upside, any dealings through 1.1175-1.12 should hit a major cluster of offers. Notice, the 100% bull proj target off the latest bracketed area aligns with the area where expected supply is eyed. To the downside, any pullbacks that occur before prices make it into the red box are conducive to consider long positions upon one’s entry trigger (see green box for ideal buys).
  • Bottom line: The EUR/USD still makes a case to see follow-through demand up until the highlighted red box overhead, where supply may kick in to see a turn of the tide. A break and close above the 1.1250 would invalidate this view.


GBP/USD technical analysis
  • Volatility: It runs at about 1-standard deviation above an increasing new base as indicated by the 100-period moving average, hence still considered extremely high. It suggests wide stops are necessary to protect the downside on entries.
  • Price structure: It is unambiguously bearish both off the weekly and daily. However, the picture has reverted to bullish through the 4-hour chart after regaining the 1.20 mark.
  • Momentum: The weekly still tells us sooner or later sellers will step in to try to get control back of the price, but this is, for now, in contradiction with the dominant order flow off the daily and 4-hour, officially turned bullish as per the smart money MA slopes.
  • Key levels: There is further room to appreciate until 1.2730. Once/if this level is hit, I am expecting the interest to sell the rally to increase exponentially. On the downside, until that upside target is met, the case to buy dips is very valid, hence I’ve underscored in green boxes the areas where buy-side pressure may re-emerge.
  • Bottom line: The GBP/USD appears to in buy-side mode for the time being on the basis of a strong bullish momentum off the lows that has further room to extend until 1.27+.



USD/JPY technical analysis
  • Volatility: The swings to expect in this pair, at the bare minimum, as the 100-period moving average indicates, should average over 110 pips. However, 1-standard deviation from the mean has been a normal occurrence in the last month, which translates in the potential for range expansion of about 200+ pips on a daily basis.
  • Price structure: There is a lot of merit in producing a weekly successful rotation that leads to validating a bearish structure. As such, the origin of its late-Feb sell-off, when retested (red box), acted as the inflection point for sellers re-taking control. This also led to the 4-hour re-aligning of its tendencies to bearish in tune with the weekly.
  • Momentum: It’s gone back to bearish on the weekly and the 4-hour chart, with more work to be done off the daily to turn the tide around. It is precisely this daily chart that still makes a case for being a buyer of weakness, but with no backing from the 4-hour nor the daily structures, it’s certainly a risky proposition.
  • Key levels: I can envision, based on the daily, the next 150 pips lower as an area for buyers to step in (green box) as a case is made via a bullish structure/momentum. However, the upside should be limited by 109.40 up to 110.00 round number, a confluence reinforced by today’s ADR limit (about 200 pips).
  • Bottom line: A clash between buyers and sellers with the latter poised to ultimately take control of price action in line with the higher timeframe picture. Evidence of the bullish technical turning can be seen via the change in outlook via the 4-hour chart.



AUD/USD technical analysis
  • Volatility: The range averages 1-standard deviation from the new ‘mean’ calculated by the 100-period moving average. What this means is that a range of about 200 pips, as in the case of the USD/JPY, is the new norm. That’s 4x jump from pre-covid19 levels.
  • Price structure: The underlying trend off the weekly and daily is clearly bearish, with the price action going through a short-term reprieve in the shorter timeframe (4-hour).
  • Momentum: The daily and 4-hour show a constructive slope based on the smart money tracker, supporting the notion that buy side order flow is dominant near-term. This is still in contradiction with the higher timeframe (weekly), which is why this rally looks set to be limited in its upside magnitude towards the red box overhead.
  • Key levels: It is precisely these red boxes that will most likely act as resistance for sellers to potentially return. But before we get to these highs, if a pullback is seen towards the 0.61-0.60 range worth 100 pips, a case is still made to be a buyer on dips. See the green box highlighted as the area where dip buying is still warranted.
  • Bottom line: The long play is still working out near term but the danger is real for the bull rally to eventually see a setback in line with the higher timeframes as guidance.



Important Footnotes
  • Market structure: Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of cycles, refer to the tutorial How To Read Market Structures In Forex
  • 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
  • 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
 

IvanGlobalPrime

Private
Messages
25
Find my latest market thoughts

FX Vol Set To Increase On Quarter End Rebalancing

The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube. You can also subscribe to the report. The purpose of this content is to taking an in-depth look at market dynamics – fundamentals and technicals – to determine daily biases and assist one’s trading decisions.

Let’s get started…

Quick Take
Narratives in Financial Markets
Recent Economic Indicators
Insights Into Forex Flows
Educational Material

Quick Take

The ebbs and flows in the Forex market were rather subdued on Monday, with volatility measures dropping to the lowest in the last month as the progressive decrease in vol stays the course. Nonetheless, the new normal is for currency swings of a much larger magnitude than we were used to before all hell broke loose. Besides, with a VIX index still above 50.00 and month/quarter end to kick in, there is a real potential for increased activity in equity/bond and FX today.

As an aperitif, we’ve seen sudden spikes in the Yen, US Dollar and Aussie crosses during Tuesday’s final fiscal day in the Tokyo fix. At the risk of sounding too reiterative, it’s worth emphasizing that while the short–term picture has worsened for the US Dollar amid the flooding of dollars into the system by the Fed and a better tone in equities, do not underestimate the phase where we are at, in which based on the bullish breakout in the USD index, further upside is still justified.

The rest of FX saw the Canadian Dollar as the weakest link, finding follow through after the emergency dovish move by the BOC (cut rates by 50bp to its lowest bound and started QE). On the flip side, the Aussie drew solid buy-side flows as the Australian PM pulled out the big guns with a very generous fiscal package to combat COVID-19. The Pound extended its impressive run too, although mildly. The remaining currencies (EUR, JPY, CHF, NZD) consolidated.



The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.

Narratives In Financial Markets

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

If you found this fundamental summary helpful, just click here to share it!

It’s month/quarter end in financial markets

This means there is increased potential for equity/bond and FX re-balancing flows. The Global FX Committee (GFXS) issued a statement last week, still applicable for today, in which it warns: “FX participants may execute larger than usual volumes during end-of-month benchmark fixings.

”Equities trade with a better tone

The S&P500 managed to recoup Friday’s losses by rising 3.4%, which could be in part related to month-end re-balancing. In Asia, stocks, especially in the Australian index ASX 200, also traveled northbound (+7%) as detailed emerged of a third fiscal package from the Morrison government.

Trump caves in

Trump extended guidelines on social distancing across the US to April 30, which is a sudden walk-back from his earlier intention to reopen the country. The latest projections by Dr. Fauci, the director of the National Institute of Allergy and Infectious Diseases and a member of the White House coronavirus task, about millions of Americans being infected and estimates of 100,000 to 200,000 deaths appears to have been a wake-up call for the President.

What else is happening?

There has been a worrying rebound in the number of COVID-19 cases in South Korea, while on the flip side, the reported rate of new infections in Italy, Spain or Portugal has slowed down. It’s also encouraging that Ford partnered with GE health to produce ventilators, alongside news that Mercedes F1 team has teamed up with engineers at University College London and UCL Hospital to build a device pumping oxygen to the lungs without the need for a ventilator, with estimates for a production rate of 1,000/day near term.

This DB report digs deeper

For an more in-depth update on how cases have developed globally, the Deutsche Bank Research Team does a great job in this daily report. It underscores that “global cases have risen to over 700,000, with the US driving the bulk of the growth rate.

”Subdued ebbs and flows in Forex

On Monday, currencies traded quietly with the USD regaining some of its lost ‘mojo’. In terms of range expansions, the G8 FX complex averaged much smaller swings as the market takes the foot off the gas pedal end of quarter adjustments. Do not underestimate the phase where we are at, in which based on the bullish breakout in the USD, further upside is likely in weeks ahead. Reuters carries a solid article today to contextualize it.

Oil at lowest in 18 years

WTI crude oil broke below the $20.00 mark, down more than 6%, with the close just above the round number, in what still represents the lowest close since January 2002. Today President Trump talked with Russian President Putin but no breakthrough was reported. I recommend the readership to read the following report by Goldman Sachs titled ‘An Industry Game-Changer’

Germany’s GDP set to collapse

The German economy, so dependable on exports, is in for some rude awakening, as are the rest of global economies to be honest. It nonetheless caught my attention this report by Reuters noting “it could shrink by 5.4% this year due to covid”, Germany’s council of economic advisers said on Monday.

What about the US?

COVID-19 job losses could total 47 million, and the unemployment rate may hit 32%, according to St. Louis Fed projections. “These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years,” St. Louis Fed economist Miguel Faria-e-Castro wrote in a research paper posted last week.

China to go all in to protect jobs

In the following report by JP Morgan, the bank summarizes the March 27th meeting by the Chinese Communist Party (CPC), which is a fresh look at the policy reactions to come, likely to be massive as they are discounting a scenario where the world goes into recession.

Recent Economic Indicators & Events Ahead



Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!

Insights Into Forex Majors

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.

If you found the content valuable, give us a share by just clicking here! Besides, if you have a suggestion on extra instruments for me to cover, reach out to me via Twitter.

EUR/USD technical analysis



Volatility

It remains above the ‘mean’ as measured by the 100-period moving average, which acts as a great stabilizer of the average vol. However, this is one of the narrowest range since March 10th.

Price structure

The weekly chart has sellers in control after the last successful rotation, as is the case in the daily, where the abrupt rebound off a fresh multi-year low is yet to form higher highs and higher lows. On the 4-hour chart, the bullish case remains valid as the price enters discounted territory, hence a buy setup would be in line with the bias.

Momentum

The buy-side action, if it were to re-emerge, has the backing of the smart money trackers off the 4-hour and daily. This backdrop is relevant if looking for short-term trading conviction, as it suggests buyers are still the force in control as structure and momentum matches off through the 4-hour chart dynamics.

Key levels

In the big picture, this is a market where sellers have the upper hand subject to protection of the 1.1170-1.1250 supply area. To the downside, as long as 1.0990-1.10 is protected by not allowing 4-hour closes below, it suggests buying pressure is a real possibility.

Bottom line

While on the big picture the sell-side control is retained, leeway is still available to the upside, which based on the near-term structure and momentum, may materialize but rally would be limited.

GBP/USD technical analysis



Volatility

It’s the first time since Feb 25th that vol has fallen below its ‘mean’ as measured by the 100-period MA. Nonetheless, recent history suggests this is an anecdote and much higher levels of vol eyed.

Price structure

The bigger timeframes (weekly, daily) communicate sellers are the side in control. However, this view clashes with the near-term technical reality, where buyers have dominated proceedings with the 4-hour still retaining a positive structure.

Momentum

It has turned positive in both the daily and the 4-hour as per the smart money trackers. This bullish settings adds to the case that in the near-term, the 4-hour chart may see further pushes higher.

Key levels

The positive view off the 4-hour must be reconciled with the fact that the 100% bullish projection target has been met. Notwithstanding this overhead constraint, pullbacks are still seen as potential buy-side opportunities within the green box if one’s prop setup shows up. To the upside, assuming the immediate resistance is cleared, 1.27+ becomes the next target for buyers.

Bottom line

The big picture implies the current bullish momentum should be limited in nature, but further room for the Pound to appreciate up towards the 1.27 area is a scenario I can envision based on the current alignment of the 4-hour structure/momentum.


USD/JPY technical analysis



Volatility

The ‘mean’ measurement in red line (100-period MA) implies a vol of 110-115 pips as the new normal. Vol has nonetheless been in a steady decrease since the peaks of 400 pips/day.

Price structure

On the weekly, the bearish forces are dominant, but that’s starting to change off the 4-hour and daily where buyers are now the side that shows the most control of price action.

Momentum

The daily is still the main guidance for those looking to find the backing of momentum via the smart money tracker. The 4-hour still looks pre-mature to be aggressively bullish, but again, this can be seen as being offset by the daily stance.

Key levels

Should the daily bullish momentum extend, the area to expect a cluster of offers that may limit the progress starts from 109.30, while on the downside, the green area highlighted yesterday has so far acted as a location for buyers to regain control.

Bottom line

While the weekly is not supportive, the picture clears up in favor of the bulls through the analysis of the 4-hour and daily. Buy-side setups have now the backing of these timeframes structure-wise. In terms of momentum, the daily also shows a case can be made, hence the net balance is a market that justifies buy on dips.

AUD/USD technical analysis



Volatility

The theme of decreasing vol in the Aussie is still playing out with the latest range matching up the new ‘mean’ of about 100 pips.

Price structure

The 4-hour chart is the chart that one must resort to in order to justify higher levels heading into Tuesday as the stepping formation of higher highs and higher lows stays the course. On the bigger timeframes, this is a market where sellers have the upper hand.

Momentum

The 4-hour but also the daily, after a steady appreciation for over 7 days, has allowed the smart money tracker to turn bullish. This reinforces the idea that near term buy-side pressure remain a probable scenario subject to the 4-hour defending its bull structure.

Key levels

The level that I expect the next bullish phase to target, if it were to occur, includes the 0.6280-0.6320 ahead of 0.6450. These levels have been highlighted in a red box. To the downside, the green box off the 4-hour portrays where I believe the cluster of limit orders to rest.

Bottom line

The bullish case can be put forward on the basis of the 4-hour structure and momentum. However, as in the case of other major pairs, this bias may not last as the USD macro bull run is unlikely to just simply terminate judging by the bigger timeframe trends.

Important Footnotes

Market structure


Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

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.

Fundamentals

It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

Projection Targets

The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection
 

IvanGlobalPrime

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USD Funding Crunch Eases, Quater-End Flows Behind


The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube. You can also subscribe to the report. The purpose of this content is taking an in-depth look at market dynamics – fundamentals and technicals – to assist trading decisions.

Let’s get started…

Quick Take
Narratives in Financial Markets
Recent Economic Indicators
Technical Insights Into Flows
Educational Material

Quick Take

The outperformance of the Pound continues to standout in the forex market, with the Yen joining the party as we leave behind the month/quarter-end rebalancing flows. In contrast, the US Dollar still trades on a rather soft note despite the latest ebbs and flows kept the currency better bid. A special mention goes to the Canadian $ on Tuesday, as it saw an impressive spell of buy-side pressure as hedges and benchmark fixings kicked in through early hours of US trading.

The launch of yet another Repo Facility by the Fed (read ‘swap lines’) to help support the smooth functioning of financial markets and further ease the USD funding pressures and avoid further liquidation of USD-denominated assets by international actors (Central Banks/Int’ monetary authorities) seems to be working. The USD Libor-OIS spread is progressively adjusting lower, which means the cost of borrowing USD via EUR/USD and USD/JPY FX swaps decreases.

The end of the month was not kind to the Oceanic currencies, with selling flows hitting both the AUD and NZD since the Asian hours without a particular catalyst, unlikely to be found on such a flow-driven day. The peculiarity of the relaxation in the USD liquidity crunch crisis is the significant reduction in volatility, not only in the Forex market overall, but especially through the EUR and the CHF flows.




The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.

Narratives In Financial Markets

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

If you found this fundamental summary helpful, just click here to share it!

MONTH/QUARTER END RE-BALANCING PLAYS KEY ROLE

Month/quarter end flows cause whippy moves in the currency market by the end of London without a fundamental basis as a driver but rather it was all about the benchmark fixings to re-balance books.

MIXED SIGNALS IN EU/US EQUITY MARKETS

The signals from European and US equities were not consistent as the key benchmark indices in the former ended higher while in the US, it was a softer affair, not even the talk of a push for a $2trn infrastructure package by Trump nor the deferral of tariffs did the trick. On a quarterly basis though, the performance in the Stoxx Europe 600 index, down 23%, beats the 20% slide in the S&P 500.

FED LAUNCHES FRESH SWAP LINES WITH INT’ CREDITORS

The US Federal Reserve announced the establishment of a temporary FIMA Repo Facility to help support the smooth functioning of financial markets. In other words, this is yet another liquidity measure aimed at providing US dollar funding to a larger number of foreign central banks and international monetary authorities in exchange for US Treasuries. The measure is intended to slowdown the selling of USD-denominated assets by these foreign entities needing. Lyn Alden, Founder of Lyn Alden Investment Strategy, said “consider that the U.S. is helping its creditors not do disorderly fire-sales of its assets. The U.S. is the net debtor rather than the net creditor in this scenario.”

USD LIBOR-OIS SPREAD EASES FURTHER

All the constraints about the increased difficulty to get USD funding, which can be analyzed via the USD Libor-OIS spread, continue to progressively ease even if still at elevated levels. The expectation for coming quarters is that the spread will keep adjusting lower. As the Research Team at the National Australian Bank notes, “the cost of borrowing USD via EUR/USD and USD/JPY FX swaps continues to fall, in a further sign that funding pressures are abating.”

LOCKDOWN PERIODS IN EUROPE SET TO EXTEND

Europe is headed for an extension of COVID-19 lock-down measures for another 4 to 5 weeks. Besides, the deaths and new cases in countries such as Spain or Italy remain too high, in the case of the former, the deadliest day yet. As Bloomberg reports, “European governments doubled down on efforts to maintain rigid lockdowns amid tentative signs that the infection rate is slowing.” Italy’s PM was the most direct by noting that the government may extend the lockdown restrictions until May 1 with a gradual opening afterwards.

US HEADED FOR THE SAME PATH AS EUROPE OR WORSE?

In the US, COVID-19 cases remain on a steady climb as New York reports largest daily jump in hospitalizations. That said, Dr Fauci, the director of the National Institute of Allergy and Infectious Diseases, noted that “we’re starting to see glimmers … just the inklings” about the effectiveness of social distancing measures to limit the spread. Dr. Fauci was prudent to say “we’re not seeing a turnaround yet.” This follows the decision by Trump to extend social distancing guidelines across the US by up to the end of April for now.

AUSSIE/KIWI SOCIAL RESTRICTIONS HERE TO STAY

In the Oceanic region, with Australian PM Morrison making it very clear that Australia is in for a long battle warning the population to be prepared for six-month of major restrictions, a similar heads up was given by NZ Health Minister David Clark, saying “some coronavirus restrictions are going to be in place for a long time”, adding that “tight border controls may persist.” Make no mistake, this is a global phenomenon, as such, this grim outlook pretty much applies to many other countries hit hard by the COVID-19 pandemic.

TRUMP NOT DONE YET IN ITS STIMULUS SPREE

Trump is calling for an extra $2 trillion infrastructure bill as part of the government’s emergency response to the coronavirus pandemic. As CNBC notes, “it remains to be seen if Congress will be comfortable passing another mammoth spending measure after approving the emergency $2 trillion coronavirus relief bill last week.” If more momentum is gathered around this idea, it could be another impulse for stocks, even if a constant reconciliation is required as the market may be underestimating the length of time the economy is frozen.

US SET TO APPROVE DEFERRAL OF TARIFFS PAYMENT

U.S. President Donald Trump has given the green light and approved a proposal spear-headed by some businesses to delay payment of certain tariffs by three months, according to people familiar with the matter. Bloomberg notes that the order would give the Treasury Department the authority to direct Customs and Border Protection to delay collecting tariffs on those imports for 90 days.”

JAPAN GOES FOR ITS BIGGEST ‘BANG’ YET

In Japan, the ruling party proposed the biggest-ever stimulus package worth 60 trillion yen (S$789 billion) as the country is headed into a recession. The package would be destined towards cash handouts, subsidies to households, with the largest chunk to provide financial assistance and funding to firms. “Quite a few in the party hold the view that this still isn’t enough,” the party’s policy chief said.

PUTIN & TRUMP AGREE TO SET UP OIL CONSULTATION

The Kremlin said Putin and Trump agreed that there should be consultation on oil market, despite no date agreed. As Reuters notes, “top energy officials will discuss slumping global oil, the Kremlin said, as Trump called Russia’s price war with Saudi Arabia ‘crazy.’ The Oil market trades at an 18-year low around $20.00/barrel. “Huge inventory builds, potentially exhausting spare storage capacity, will mean that market balance requires an unprecedented output shutdown by producers,” Standard Chartered Plc analyst Emily Ashford wrote.

MACRO-WISE, NOBODY KNOWS HOW IT WILL TURN OUT

This article by Sven Henrich via NorthmanTrader.com was especially refreshing due to its brutal honesty, which I wholeheartedly share. Sven notes that “nobody truly knows how any of this will turn out and I think this point needs to be driven home more clearly.” He makes the point that for the technical-oriented traders, since focus is primarily on market technicals “that’s an ever evolving picture that offers us pivot points to decide when and where to get engaged in.” But on the macro? Sven’s view is “everybody is just guessing.” Good read.

Recent Economic Indicators & Events Ahead



Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!

Technical Insights Into Flows

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.

If you found the content valuable, give us a share by just clicking here! Besides, if you have a suggestion on extra instruments for me to cover, reach out to me via Twitter.

EUR/USD technical analysis

Keeping the limited upside potential in mind, as per the multiple failures best visible through the weekly chart, the buy-side commitment is still present in this market as a liquidity grab (green area 4-hour) saw a strong pocket of demand, so far invalidating a bearish structure. Instead, the market is in a potential transition to range-bound conditions even if a resumption of the 4-hour uptrend up to 1.1170-1.12 should not be ruled out if the 1.1070-75 area is re-taken. Daily volatility levels of about 100 pips is the bare minimum to expect.



GBP/USD technical analysis

The base case put forward in yesterday’s report that supported the notion of dip-buying still warranted based on the positive confluence of the 4-hour structure and momentum worked out well. The market is currently sandwiched in a 100 pips box between emerging interest by dip-buyers circa 1.2340-50 and a cluster of offers through 1.2450-80. Once either side is taken out with a 4-hour close above/below, only then we will get further clarity, even if the inertia remains to be a buyer on the lower 4-hour timeframe, a picture that is supported by the momentum off the daily as per the smart money tracker and the fact that there is still ample room until the next key resistance at 1.27+.



USD/JPY technical analysis

To sum up the annotations in the chart below, the sellers have re-taken control of price action in the lower 4-hour timeframe, with a break of Monday’s low through 107.10 to expose a deeper setback. This bleaker picture for the pair is supported by the turn in the smart money tracker to bearish off the daily timeframe too. The rise in the pair on Tuesday, breaking the structure was not backed up by the momentum as the slope was still pointing down, reinforcing the notion that only when both structure and momentum are in alignment, the best directional plays come about as one side truly exercises the most control. Daily volatility in the pair is averaging just over 100 pips.



AUD/USD technical analysis

The pair has entered a consolidation period through the 4-hour chart, which means a resolution through one of the extremes is necessary to clear up the outlook to anticipate the next directional play. Based on the daily chart, the momentum is bullish but the structure doesn’t aid this positive backdrop, hence not enough clarity. In terms of levels to target, there remains available leeway to the upside until the next level of horizontal resistance circa 0.6290-0.63 comes into play. As in the case of the USD/JPY, daily volatility to expect minimal is 100 pips.



gold technical analysis

The gold market is rolling over with sellers the side in control in the 4-hour chart as I explain in the chart below. This setback originates off a strong supply imbalance marked in a horizontal red box. I see the most compelling case to be positioned for sell-side action on strength into the overhead red box I’ve marked above the current price. This bias is supported by the daily bearish structure (not the momentum). The volatility in the shinny metal has oscillated between $35-$50 last week.




Important Footnotes

Market structure


Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

Support/Resistance

Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.

Fundamentals

It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

Projection Targets

The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection
 

IvanGlobalPrime

Private
Messages
25
Find my latest market thoughts

Yen Strength & Risk-Off Prevail

The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.

Quick Take

As risk-off returns wit a vengeance, the Japanese Yen and the US Dollar were the best performers in a day that saw US equities down to the tune of around 4% while bond yields also imploded. With the Western world, especially the US, in the eye of the storm, playing catch up due to the slow response it had, a somber Trump warned of up to 240k deaths estimated with the worst yet to come, so it’s no wonder that the sentiment was shot to pieces. Trump said “this could be a hell a bad two weeks and maybe three weeks”.

Amid this environment, the buy-side campaign in the Pound stays the course, as the currency holds up rather steady to the treacherous environment out there, shrugging off the daily UK death toll reaching record highs. The Euro and Swissy traded in a disjointed manner as it related to risk dynamics, which reinforces the notion that whatever unwind of carry trades has is now completed and a new paradigm of trading has ensued, with the market probably taking the pulse of fair valuations based on the evolution of COVID-19 in the Eurozone area.

Special mention deserves the Aussie. At Global Prime, we were asked by some clients what the heck happened to the currency as a sudden 100+ pips spike came out of the blue. I too struggled to understand that mysterious volatile move which carried no catalyst. As i dug deeper, I noticed it wasn’t a single move overwhelming sellers, but rather it built up over a span of a few minutes, which suggests the combination of a strong buy-side campaign by ‘unknown forces’ amid some massive liquidity problems, as if all market makers had vanished at once. A similar move occurred on March 31st during the Tokyo fix, but that was related to fiscal year-end flows.



The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.


Narratives In Financial Markets

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

If you found this fundamental summary helpful, just click here to share it!

NOT THE IDEAL START FOR RISK DYNAMICS

It’s been a very poor start to the second quarter in financial markets as both heavyweights (US equities and US bond yields) dropped simultaneously as the market keeps pricing in the utter destruction of economic activity in a world fully engulfed by the COVID-19 crisis. The average declines in US main indices was to the tune of -4%

BRACE FOR ANOTHER DISASTROUS US JOBLESS CLAIMS

Economists are calling for yet another set of extraordinarily high unemployment data released this Thursday. It is said that the numbers could exceed last week’s blockbuster report. As Business Insider reports, “estimates range from about 3 million to as many as 5.5 million jobless claims for the week ending March 28.” To make it worse, economists anticipate upward revisions to last week’s number.

TAKE ECONOMIC DATA WITH HUGE PINCH OF SALT

Especially in these treacherous COVID-led crisis, be overly cautions to treat economic data at face value. Most if not all the data is not up-to-date or reflective of the decay in economic destruction we are going through, which is why the market is most likely going to see through it. Therefore, do not attach too too much, if any weight, at better than expected’ economic data from the US, China or other major nations. Improved US ISM on Wednesday got easily ignored, with a similar reaction to the recent upbeat Chinese PMI earlier this week.

SOMBER US OUTLOOK AS COVID-19 SPREADS

The overarching theme and playing the key role as the driver for financial markets is the rate of deaths/new cases as part of the COVID-19, what we understand as the distribution curve. With the Western world, especially the US, in the eye of the storm, playing catch up due to the slow response it had, and a somber Trump warning of up to 240k deaths estimated with the worst yet to come, the sentiment was shot to pieces. Trump said “this could be a hell of a bad two weeks and maybe three weeks”. It appears as though we are still far from the death toll curve peaking in the US with markets finding little comfort.

WHO WOULD HAVE THOUGHT THIS? (SARCASM)

US intelligence has come forward to make an official case, submitted to the White House, in which it stats that China under-reported virus cases and deaths, which is hardly a surprise based on the number of urns delivered at the time and the activity in crematoriums. The report, obtained by Bloomberg, notes that “reporting on the scale of the virus was intentionally incomplete and concludes the numbers were fake.”

A LONG AND WINDING ROAD TO NORMALITY IN CHINA

As China aims to progressively return back to more normal conditions with lock-downs being lifted, the experiment appears to be backfiring as some venues that had reopened were told by the government to close yet again amid fears of a re-emergence of the virus. Fear of second wave is real and authorities are taking no chances. In fact, as the SCMP notes, “authorities ordered residents of Jia county to stay home after reports of cases linked to the area’s hospital resurfaced.”

HUGE SPIKE IN THE OCEANIC CURRENCIES

I struggled for answers on the AUD spike as there was no catalyst, which makes you think ‘fat finger’ even if i have a hard time thinking that’s the case. As i dug deeper, i noticed it wasn’t a single move overwhelming sellers, but rather it built up over a span of a few minutes, which suggests the combination of a strong buy-side campaign by ‘unknown forces’ amid some massive liquidity problems, as if all market makers had vanished at once. This is a very rare move in the AUD. A similar move occurred on March 31st during the Tokyo fix, but that was related to fiscal year-end flows.

FED ANNOUNCES CHANGE TO LEVERAGE RATIO RULE

The Fed announced that to ease strains in the Treasury market resulting from the coronavirus and increase banking organizations’ ability to provide credit to households and businesses, it will establish a temporary change to its supplementary leverage ratio rule, which would exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the rule for holding companies, and will be in effect until March 31, 2021. What this translates into in less technical terms, as Zero Hedge explains: “The Fed has effectively granted banks some 2% in balance sheet capacity to use as they see fit, as long as it is not for buybacks, eligible capital which they can – and likely will – use to buy more Treasurys knowing they can then just flip those Treasurys back to the Fed with a profit. Sure enough, Treasury yields immediately dumped after the news.”

EMERGING MARKETS RISKS ACCELERATING

FX moves in the exotic pairs are going parabolic in several of the big EM FX pairs as the investment worlds continues to price in a deep recession globally, which tends to hit the hardest emerging economies. The ZAR, MXN, TRY, BLR are all falling hard vs the USD as the epic exit to safer harbors runs its stead and unstoppable course. Reuters reported that the International Monetary Fund officials said on Wednesday that “the coronavirus pandemic is putting major strains on emerging market economies, but are confident that the Fund has sufficient resources to meet their needs.” The fund is “quite a bit away” from exhausting its $1 trillion in total lending capacity and is working to identify new sources of funding and liquidity for member countries, the officials told a conference call with reporters.


Recent Economic Indicators & Events Ahead



Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!


Insights Into Forex Majors

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.

If you found the content valuable, give us a share by just clicking here! Besides, if you have a suggestion on extra instruments for me to cover, reach out to me via Twitter.

EUR/USD technical analysis

The pair has transitioned into lower levels but the quality of the structure printed for the interest of sellers is far from encouraging as every breakout into new lows gets rejected. This is understood as ‘compression’, which could be a precursor for a buy-side campaign. This potential scenario is reinforced by the location price has landed, a previous resistance now turned support.However, with the structure and momentum still pointing lower, it is far too premature to venture into longs at this stage as it’s still a premature decision. Note, the daily and weekly are still overall bearish, which doesn’t clear up the picture.



GBP/USD technical analysis

It’s a tough call to call the next direction in the pair as it navigates through a period of price confinement. A resolution in either direction is necessary for new committed capital to enter. The recent inertia has been to the bullish side, hence in the 4-hour the context includes a consolidation as part of a bullish cycle. However, as one step out to higher timeframes, the sellers are the force in control, making the confluence lower/higher timeframes not ideal. Await a breakout, and then, based on your style of trading, look to engage if warranted.



USD/JPY technical analysis

We are firmly in bearish territory both in the 4-hour and daily timeframes now, with an alignment of momentum as well. Therefore, the path of least resistance, as I see it, is to the downside. Ever since the breakout of structure to bearish in the 4-hour (24h ago), the notion endorsed in these analysis to ‘sell on strength’ has paid off. I see sufficient technical evidence to still support this stance, with the trigger to enter the market a whole different topic as it’s largely dependent on one’s personal style. Your setup, nonetheless, requires to trader under a specific context I’d imagine, and that’s what this analysis facilitates.



AUD/USD technical analysis

The breakout of structure and momentum through the 4-hour chart suggests the tide has turned in favor of sellers. We even had a major spike in the AUD, with the sizable upper shadow a technical admission that the market is loading up sell limits above price. My view is that unless the 4-hour chart closes above the 0.6140-60 area, the sellers are now the group exercising the most control of price action, hence why I’d expect the downward pressure to potentially continue.



GOLD technical analysis

The case to sell gold on rallies continues to play out rather successfully. I highlighted a red box 24h ago as the area most sensitive to see the bulk of sell orders return for a potential resumption of the downtrend in the 4-hour chart, and that’s what’s transpired so far. I would expect the sell-side campaign to struggle once $1,550.00 is reached (green area) but with the 4-hour and daily re-aligned to the bearish side, I have some serious reservations about the outlook of gold near-term.




Important Footnotes

Market structure

Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

Support/Resistance

Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.

Fundamentals

It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

Projection Targets

The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection
 

IvanGlobalPrime

Private
Messages
25
Find my latest market thoughts

Oil At The Epicenter Of Market Volatility

The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.

Let’s get started…

Quick Take
Narratives in Financial Markets
Recent Economic Indicators
Insights Into Forex Flows (Video)
Educational Material

Quick Take

It was all about the blockbuster move in Oil on Thursday, with the energy instrument right at the epicenter of the moves that unfolded in currencies, bonds, equities, credit and volatility (VIX, MOVE indices).

The President tipped CNBC that he was about to tweet a market-moving announcement in which he took pride of ‘brokering’ a potential re-conciliation between the Saudis and Russians for an eventual 10-15 mbpd oil productions cut. It was a wild ride from there, with Brent almost 50% up at one stage before the dust settled.

The deal is still conditional to the Saudis finding sufficient solidarity by other OPEC members, hence a lot of questions are still up in the air. Saudi Arabia called for an emergency OPEC+ summit seeking guarantees that other countries will join in.

After all said and done, the CAD and NOK were the out-performers, with the USD showing fortitude too. JPY was the most punished by the bid caught by equities. A currency that continues to impress is GBP, the clear dominant of buy-side flows in the G8 FX complex in the last 7 days. In contrast, the EUR and CHF succumbed for a 2nd day in a row, while the Oceanic currencies are still putting up a fight.



The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.


Narratives In Financial Markets

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

If you found this fundamental summary helpful, just click here to share it!

Oil rallies hard on hopes of a cut in production

Oil skyrocketed over 20% after tentative signs that there is going to be some sort of production cut as Trump announced that he managed to ease the strained relations between Russia and the Saudis. So far, the talk indicates that a cut of 10m barrels a day is on the table. News of China looking to increase its strategic oil reserves aided the Oil move.

Trump’s tweet lifting the oil deal prospects

Trump tweeted: “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!…..Could be as high as 15 Million Barrels. Good (GREAT) news for everyone!”. Saudi Arabia wants an emergency OPEC deal as long as other nations join in.

US jobless claims total 10M in two weeks

US jobless claims showed another blockbuster number following the rise to a record 6.65 million last week, never seen before in history. Filings totaled 10 million in two weeks. As Bloomberg reports, a jobless rate of 20% ‘not unthinkable’ as shutdowns multiply. Up to 6% of the workforce has filled for benefits in such a short span.

USD & equities find solid bids

The USD remains one of the best performers this week, even if the Pound and Canadian Dollar put up a fight. The latter was one of the main beneficiaries, together with the Norwegian Krone, over the encouraging Oil news that also sparked a rally in equities, especially in the energy sector. The S&P 500 ended up just shy of 2.5%.

Time for the US Non-Farm Payrolls

It’s time for the US Non-Farm Payrolls tonight, but as the team at the National Australian Bank notes, “we are unlikely to see a large impact on Payrolls tonight given the payroll pay period is the period including March 12, which pre-dates the rise in jobless claims.” Besides, they also argue that “the survey period for the jobless rate also pre-dates the rise, with the household survey referencing the week of March 8-14.”

When will the lockdown really end?

In an article published by the Research Team at ING, Analysts argue that based on their modelings, “some countries in Europe may try to end lockdown measures at the end of April.” However, they warns that those suffering large-scale infections, “won’t be in a position to ease back restrictions on travel and movement until the end of May/June (or later for the US).” Lastly, they detail that “a true return to ‘normality’ probably won’t come until the end of the year.” Here is a supplementary chart on when to expect a lift in restrictions.

S&P reaffirms US At AA+, Outlook Stable

The US credit rating is safe as per the latest update by S&P. As stated late on Thursday, “the ratings reflect its diversified and resilient economy, extensive monetary policy flexibility, and unique status as the issuer of the world’s leading reserve currency. The ratings are constrained by high general government debt and fiscal deficits, both of which are likely to worsen this year following the economic shock caused by the coronavirus pandemic, before moderating over the next three years. The outlook remains stable, reflecting our expectation that unprecedented fiscal and monetary stimulus will limit the economic downturn and set the stage for recovery in 2021.”

COVID has infected 1 million people across the world

The latest global developments in the coronavirus front indicates that
cases have now topped 1 million with more than 50k deaths. The number of deaths in Spain have surpassed the 10k mark as frustration continues about test kits shortage all over the Western hemisphere. The latest intelligence reports indicate falf the world on lockdown.

VIX to keep adjusting lower?

After the Fed went “all in”, expectations for US bond volatility, as indicated by the MOVE index, which measures U.S. interest rate vol, collapsed to pre-COVID levels. What this most likely implies is that if history is any indication, the VIX should gradually be adjusting lower too in order to reflect the relaxation of vol in bonds.


Recent Economic Indicators & Events Ahead



Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!


Insights Into Forex Flows

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.



If you found the content valuable, give us a share by just clicking here! Besides, if you have a suggestion on extra instruments for me to cover, reach out to me via Twitter.


Important Footnotes

Market structure

Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

Support/Resistance

Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.

Fundamentals

It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

Projection Targets

The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection
 

IvanGlobalPrime

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The USD Takes The Front-Seat Again

The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.

Quick Take

The out sized price swings continue to relax, as clearly seen by the normalization of volatility measures across financial markets, be it via currencies as depicted by implied vol in options and/or simple ATR calculations based on new higher ‘means’, equity indices as expressed by the VIX (reduction of 50% from its peak) or the US money markets (bond yields in the front and long-end of the curve).

One could argue that the expectations building up for a promising outcome out of the emergency OPEC+ meeting later this week (tentatively scheduled for Thursday) are partly to blame, as the price of Crude Oil, while severely marked down at the open of markets in Asia after a delay of the meeting first thought to be today, is still seen as a stepping stone but not a canceler of the hypothetical scenario in which the big players are able to reach a consensus. With Russian/Saudi tensions still flaring up, the bar has been set quite high I must say.

The performance of currencies still portrays that the main play as of late has been to accumulate USD long positions (in today’s video I show how one can look to exploit these trades), with the Canadian Dollar also gathering significant buy side interest driven by the boost in Oil coupled with re-emerging positive correlation with the USD.

The Pound, on the contrary, suffered the most losses as it finally found a resolution from its week-long lengthy range, with the Aussie and Kiwi, also proving quite vulnerable in technical-driven rotations. The Yen also traded on the weak side as sentiment stabilized with moderate movements in equities and a lower VIX, while the Euro and Swissy, are starting to see tentative evidence of greater buy-side interest.



The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.


Narratives In Financial Markets

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

If you found this fundamental summary helpful, just click here to share it!

US NFP REPORT TREATED AS SECONDARY DATA

The US NFP numbers came much worse-than-anticipated (-701K decline vs estimates of -100k). With economic data taking the backseat and at the mercy of the daily covid-19 developments, and with the recent US jobless claims giving us a taste of how dire the jobs has turned out, the market shrugged off the report with little FX reaction.

RISK SENTIMENT SHOWS VOLATILITY MODERATING

Risk sentiment has found a new leg of stability despite one would be hard-pressed to conclude so by looking at the performance of the US Dollar and the Yen in the last 24h. With a VIX anchored at lower levels of around 40.00 from a peak of 83.00 last month, and equities/bond yields trading in the narrowest ranges in quite some time, it appears as though vol is settling down, which is encouraging. The boost in the prices of Oil, as elaborated below, is providing a helping hand.

HOPES ON OPEC+ MEETING DESPITE DELAY SETBACK

The oil prices kept rising on Friday with Brent up by just under 14% to $34.00 as the market built up a scenario in which the upcoming emergency OPEC+ meeting will yield positive results. However, reports that the meeting planned for Monday has been delayed due to the re-emergence of tensions between Russia and Saudis has seen Oil marked down at the open of markets this Monday. According to the most recent reports, and assisting in the Oil run, big players such as Norway and Canada’s Alberta would be open to consider curtailing production with Iraq also expressing the right soundbites.

MORE CHALLENGING ENVIRONMENT FOR STOCKS

According to Morgan Stanley Cross-Asset Sunday call, the next 2 weeks will be more tactically challenging for equities due to 1. we are past the beneficial flows around month-end re-balancing 2. sees potential for renewed funds outflows cross-asset 3. we are past peak market uncertainty but not past peak macro uncertainty 4. earnings seasons will be downbeat 5. US covid news will continue to get worse; coasts still 1-2 weeks to peak; rest of US >40 days left to peak

AT LEAST A QUARTER OF THE US ECONOMY OFFLINE

In a report by the WSJ, citing a study by Moody’s, the state shutdowns have taken at least a quarter of the US economy offline. It notes that “eight in 10 US counties are under lockdown orders, according to a study, and they represent nearly 96% of national output”, adding that “this is an unprecedented shutdown of commerce that economists say has never occurred on such a wide scale.”

POUND WORST PERFORMER, UK PM TAKEN TO HOSPITAL

One of the biggest losers on Friday was the GBP after it finally found a resolution of its week-long range following inter-market evidence, via the USD index performance, that the market was going through an accumulation phase. The weak stance by the Pound coincides with reports of UK PM Johnson taken to the hospital as his condition, due to persistent COVID-19 symptoms, deteriorates.

european covid-19 cases peaking out?

There are encouraging signs in Italy, France and Spain, and hopefully the countries can turn a corner in coming weeks. The former, in lockdown for over a month, reported a decreased in the number of patients in ICU for the second consecutive day, while in Spain the number of people dying has also seen an encouraging reduction. How countries in Europe transition out of the lockdown phase will be critical, even if the general sense is that government won’ take any chances and the process is going to be gradual and very slow in lifting restrictions to minimize the risk of a second wave of infections. For a more in-depth analysis on when lockdowns may be lifted on a country-by-country basis, this paper by Bank of America sheds a light.

the us just starting the late accumulation phase

For a more global update on where we are in the COVID-19 curve in countries around the world, this graphic by JP Morgan is handy. It shows that the US is still in the early stages of the ‘late accumulation phase’ as cases and deaths continue to soar, while the light at the end of the tunnel is now visible for countries like Italy, Spain, Germany… One worrying observation is that the giant populations off Brazil, Indonesia and Philippines are only now entering the acceleration phase, meaning that the number of global cases could soar in the coming weeks.

MARKETS WATCHING CLOSELY SITUATION IN WUHAN

Expectations in China have been building up for an official lifting of the containment measures on the city of Wuhan – the epicenter of the COVID-19 outbreak – . Should the government go ahead with the scheduled opening of more sectors of the city by April 8, it may prove to be yet another key factor feeding though positive risk sentiment. In Wuhan, daily life is gradually returning to normal after several months of confinement, but as this report by France24 shows, China remains worried about the risk of a second wave of the epidemic, with fresh in the memory last week’s setback in the Henan province in central China, where authorities tried to fend off a second coronavirus wave.

PROS & CONS AS SEEN BY GOLDMAN SACHS

Goldman Sachs has listed the main reasons to be optimistic and pessimistic going forward. Let’s start with the positive angle. 1. Monetary stimulus has been swift, targeted, and appears unlimited. 2. Fiscal stimulus is now in place to support individuals who are losing their jobs, incentivize companies to keep people employed, and provide a financial backstop to corporates. 3. China activity has already begun a nascent recovery, providing a lens for US investors on how things may look once the impact of virus mitigation efforts begins to wane. On the negative side, 1. Almost 10 million people filed for unemployment insurance. 2. GDP growth is poised to fall by an unfathomable 34% in 2Q20 (Q/Q, annualized), with the steepest drop expected in April. 3. S&P 500 earnings are forecast to fall to $110/share in 2020 with 2Q20 EPS estimated to be down 123%. GS now forecasts a 25% decline in S&P 500 dividends. 4. Supply chains are intertwined in this world such that even the recovery in China is struggling to maintain a purchase in the most secularly advantaged sector. 5. The US High Yield credit market is poised to potentially have to absorb an additional $555bn in Investment Grade downgrades as a huge swath of BBB-rated companies are re-evaluated in the coronacrisis.


Recent Economic Indicators & Events Ahead



Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!


Insights Into Forex Majors

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.

If you found the content valuable, give us a share by just clicking here! Besides, if you have a suggestion on extra instruments for me to cover, reach out to me via Twitter.


Important Footnotes

Market structure
Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

Support/Resistance
Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.

Fundamentals
It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

Projection Targets
The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection
 

IvanGlobalPrime

Private
Messages
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Find my latest market thoughts

COVID-19 Hot Spots Leveling Off Lifts Markets

The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.

Let’s get started…

Scan Of The Markets
Recent Economic Indicators
Insights Into Forex Flows (Video)
Educational Material


Scan Of The Markets

It’s a big day for the optimistic-type, as equities in the US, represented through the S&P 500 as the bellwether, broke into higher territory, confirming the first breakout of daily structure to bullish since the whole COVID-19 saga started to unfold out of control (chart below).



Today’s video analysis touches on this equity breakout in detail, so you don’t want to miss it as I also dive into the supportive picture we are seeing through the consistent decline in the VIX index (fear indicator), which has come down over 50% from its peak last month.

There is hope up in the air that some countries the likes of Italy, Spain, Germany, Italy and other mainly European countries are leaving behind the darkest period of the pandemic as cases/deaths peak.



The fact that there is growing talk of containment measures in the European continent phased out added fuel to the rally in equities. Caution is still warranted when looking at the other side of the pond, as the US still appears to be in the early-mid phase of the accumulation phase, even if New York Governor Andrew Cuomo said the state’s virus-related death rate has been flattening out for two days. Trump said wants to try to lift restriction by April 30th (too premature?). Additionally, Trump also kept the momentum anchored by saying “we are seeing things happen which are very good”.

A piece of news that adds another layer of positivism includes the announcement by the Federal Reserve/Treasury of a new facility, in which, in order to further support the economic fallout, term loans to banks backed by small business loans made under the Paycheck Protection Programme will be made available.

Amid this improved sentiment, the Australian Dollar has been the stellar performer in the G8 FX space, alongside the New Zealand Dollar, validating a fresh new cycle in the 4-hour chart with momentum measures aiding the mentality to start thinking of ‘dip buying’ as the path of least resistance on Tuesday. The Canadian Dollar, also doing great, is about to break higher vs the USD too.



Note, trader must navigate the RBA policy meeting. Following the series of emergency interventions to adjust policy last month, it implies that most of the aggressive tools have already been deployed as we enter a period of policy-makers ‘wait and see’ on how these measures will feed through the economy. The RBA is there broadly expected to keep policy – the cash rate, yield curve control and QE – unchanged.

One of the key developments that I do point out in the video analysis is the reduction in buy-side flows towards the USD index. This has serious consequences as bearish breakouts in majors are at risk of starting to fail, as we are already seeing in EUR/USD (chart below), GBP/USD. Similarly, it implies limited upside in USD/JPY near term.



Some of the recent negative flows in the Pound, other than the selling inertia on the back of a bearish resolution away from a lengthy range, it also has to do with the news that Boris Johnson was moved to the ICU (intensive care unit) at St Thomas’ Hospital due to COVID-19 symptoms intensifying as of late. Here is to a prompt recovery.

Oil found dip buyers after a sharp mark down at the open of Asia after news broke out that the OPEC+ meeting got delayed until Thursday. Ahead of the high-stake emergency meeting where production cuts will be discussed, the market continues to see this event as a ‘glass half full’. This optimism has been aided by headlines that Russia is ready to discuss very substantial oil output cuts due to global demand collapse, even if economists suggest that 10 min bpd might not be enough to balance the market amid the massive destruction of demand.

To sum up, the market has shifted to its focus, even if just briefly, to promote the ascent of the risk trades, which should be good news for the interest of equity and commodity-related buyers. In the FX space, this means the JPY and USD may be capped, while the AUD, the NZD, typically riding the Aussie coattail, or CAD are set the benefit.

The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.


Recent Economic Indicators & Events Ahead



Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!


Insights Into Forex Majors

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.

If you found the content valuable, give us a share by just clicking here! Besides, if you have a suggestion on extra instruments for me to cover, reach out to me via Twitter.


Important Footnotes

Market structure
Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

Support/Resistance
Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.

Fundamentals
It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

Projection Targets
The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection
 

IvanGlobalPrime

Private
Messages
25
Find my latest market thoughts

Broad-Based USD Weakness The Main Play

The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.

Let’s get started…

Quick Take
Narratives in Financial Markets
Recent Economic Indicators
Insights Into Forex Flows (Video)
Educational Material

Quick Take

There is no doubt that the flattening of the COVID-19 curve in many countries has been a trending narratives to explain the recovery in equities. This positive dynamics, in turn, have led to the broad-based depreciation of the USD as the relaxation of stress in the system, combined with the ultra accomodative policies by the Fed, lessens the need to tap into the currency as the liquidity strains ease a tad. The Yen suffered the consequences of the groovy vibes for most of the day too.

But the jury is still out there as to whether or not the recovery in equities can find further legs amid the utter destruction of wealth and jobs seen as of late. The fact that the White House is in the ‘early stage’ plan aimed at re-activating of the U.S. economy in certain area, adds to the transient bullish sentiment. Even if the sharp fall in the S&P 500 into the close leaves us an ugly-looking candle as all gains were evaporated, in today’s technical/intermarket analysis argue for sellers in need of more work to be done to turn around the intraday buy bias.

The currency that benefited the most from the combination of a weakening USD and a falling VIX was the Aussie. It was also backed by the surprising comments from the RBA, willing to curtail its QE program in size and frequency if the COVID-led conditions improved. The Pound, the Euro, and Swissy also capitalized on the USD setback, with the CAD and NZD not having as impressive runs. The former will be especially volatile heading into Thursday’s key OPEC+ meeting.



The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.


Narratives In Financial Markets

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

If you found this fundamental summary helpful, just click here to share it!

TURNAROUND IN US EQUITIES INTO THE CLOSE

While we had a sharp turnaround into the close in US equities, erasing most of the gains from earlier in the a.m. period, such fall away in the final hours is yet to inflict technical damage in the chart in what still looks like a constructive picture from a structure & momentum angle. The S&P 500 closed slightly negative after printing gains of up to 3%.

ECONOMIC PAIN IN THE US JUST STARTED?

One of the best daily fundamental analysis about the state of affairs in the equity space, macro-wise, is put out by Roger Hirst, Independent Macro Analyst at Refinitiv. In this hugely insightful video, Roger looks at whether markets are pricing in peak fear or peak economic distress. Roger asks the hard questions such as, has the economic pain only just started? He debunks the notion of the optimists that flattening f the COVID-19 in many nations means the worst is behind us.

SPOTTED DIVERGENCES IN THE USD INDEX PLAY OUT

During Tuesday’s analysis video, I argued not only that we may see further momentum in equities, which indeed transpired for most of the day after a key breakout of structure in the S&P 500, but I also observed a significant divergence starting to re-emerge that made me more constructive in Forex majors (EU, GU, AU…) as the risk sentiment hinted at a pause in the USD buy-side commitment. Fast forward, the USD has been the main loser, with the ability of the market to keep the sell pressure ongoing conditional to risk conditions.

GLOBAL NEW COVID19 CASE GROWTH SLOWS FURTHER

In terms of the COVID-19 curves, these continue to point in the right direction in European countries such as Italy, Spain, France, UK… The main development has been the stabilization of the infection rate in the countries described above, alongside news that in the US, and New York in particular, continues to see improving new case growth and fatality numbers. Besides, a complete collapse of the health system in New York may have been prevented for now. An in-depth update on where we stand from a statics angle can be fond via DB Research.

TRUMP preps master PLAN TO REOPEN ECONOMY

According to a report published by Bloomberg, the Trump administration is in the works with an ‘early stage’ plan intended to prioritize the re-activation of the U.S. economy. The plan will be centered around a substantial increase of testings, according to sources. Bloomberg notes that “the effort would likely begin in smaller cities and towns in states that haven’t yet been heavily hit by the virus. Cities such as New York, Detroit, New Orleans and other places the president has described as “hot spots” would remain shuttered.”

RBA KEEPS POWDER DRY AFTER BIG GUNS DEPLOYED

On Tuesday, the Reserve Bank of Australia kept its policy intact, which now includes conventional and unconventional monetary tools deployed to combat the economic fall out due to COVID19. The bank kept its benchmark rate at 0.25% as the main target for both the cash rate and the 3-year government bond yield as part of its curve-control. There was a positive input for the Aussie, which saw an immediate spike, after the RBA stated that ‘if conditions improve, smaller and less frequent purchases of bonds will be required’.

THE CONSTANT EUROPEAN NORTH-SOUTH STRUGGLE

A critical video conference of EU Finance Ministers that has gone into the late hours of Tuesday, has so far seen no agreement for the potential creation of what’s been referred as ‘coronabonds’, which would unleash much-needed capital for the battered economies, and the pre-cursor to create a recovery fund. Once again, the division within the bloc are coming to the surface. Germany and the Netherlands has drawn a line in the sand. Therefore, it is the known differences between North and South that keeps jeopardizing the approval of a credit package of more than half a trillion euros.

OIL DOWN AHEAD OF HIGH-STAKES OPEC+ MEETING

The price of Oil fell sharply in the US session, erasing further gains as OPEC+ is mulling a production cut agreement, even if the uncertainty surround the outcome remains very high. Oil prices have recently gone on a steady climb but the technical picture in Oil is starting to revert back in favor of the sell-side forces. OPEC+ has signaled a willingness to cut if the U.S. join in, according to Reuters. Oil ministers from the G20 will also meet virtually on Friday, which is seen as a positive signal to add more momentum to the global negotiations. Be aware, however, that even if a major deal is agreed upon, gap in oil demand, even a substantial cut on the order of 10 mb/d may not rescue oil prices.

KEEP EYE ON THE POUND AS UK PM REMAINS HOSPITALIZED

In the UK, Downing Street updated the press about the Prime Minister’s condition, noting that while doctors still consider him in “stable” condition, he will spend another night in the ICU. The admission of the UK PM into the ICU is a key factor driving sentiment in the Pound, with the latest news of ruling out a diagnose of ‘pneumonia’, combined with the overall USD weakness, benefiting it. Downing Street spokesman, added that the PM’s condition was considered “stable”. The PM “remains in good spirits,” they added.

ROAD BACK TO NORMALCY UNLIKELY TO BE RAPID

The road back to normalcy in the West, based on what we are seeing in China, may take longer than most expect. This Alphawise survey in China suggests that the bounce unlikely to be rapid. Adding to the case, China Global Times Editor-in-chief Hu Xijin tweeted: “Some European countries are planning to resume economic activity. It’s too early. China is yet to reopen its entertainment sector like cinemas and is working hard to cut off transmission chains of imported cases. Europe is not ready for large-scale work resumption anytime soon.”

Recent Economic Indicators & Events Ahead



Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!


Insights Into Forex Flows

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.

If you found the content valuable, give us a share by just clicking here! Besides, if you have a suggestion on extra instruments for me to cover, reach out to me via Twitter.


Important Footnotes

Market structure
Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

Support/Resistance
Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.

Fundamentals
It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

Projection Targets
The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection
 

IvanGlobalPrime

Private
Messages
25
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USD Weakness Key Thematic As US Stocks Soar

The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.

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Quick Take
Narratives in Financial Markets
Recent Economic Indicators
Insights Into Forex Flows (Video)
Educational Material


Quick Take

The buy-side campaign in the US equity space continues to reverberate in the broader spectrum of FX via a weaker US Dollar across the board, even if this time a poorer performance was observed in the likes of the Euro, Swissy and Yen. In Europe, the market was disappointed to learn that EU ministers failed to agree on a virus rescue plan.

On the winning side, the Aussie, Kiwi and Pound thrived amid the ‘true risk on’ environment in US stocks as the buzzword of a COVID-19 flattening curve, combined with talk of further stimulus and the gradual re-opening of the US economy reinforced the good vibes. A historic stimulus employment package in Australia aided the AUD.

A special mention in the next 24h must be given to the Canadian Dollar, which has shown a sluggish performance despite the stabilization in the Oil market ahead of Thursday’s OPEC+. The push higher in Oil may have more to do with the overall ‘risk on’ sentiment and the fragile USD trend than the optimism for a deal.



The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.


Narratives In Financial Markets

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

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FLAT-LINING OF COVID-19 CURVES AIDS EQUITIES

Optimism keeps reigning in the markets as further evidence exist, via the daily global aggregation of COVID-19 cases/deaths, that developed countries (especially in Europe) are turning a corner. The flat-lining of COVID-19 curves keeps assisting the main indices in the US equity market (over 20% up from its March trend low). Anthony Fauci, director of the US National Institute of Allergy and Infectious Diseases, even said, as cited by CNBC, that “the start of a turnaround in the fight against the coronavirus could come after this week.”

RE-OPENING OF THE US ECONOMY SOONER THAN LATER

Another clear catalyst to keep the positive vibes in the US equity space include plans by Trump to reopen the economy as reported by Bloomberg yesterday, noting that the Trump administration is in the works with an ‘early stage’ plan intended to prioritize the re-activation of the U.S. economy”, with efforts would likely to begin in smaller cities and towns and be extended to bigger cities later (NY, etc). Speaking to Fox News, the President said the administration was “looking at the concept where we open sections of the country and we’re also looking at the concept where you open up everything.

CHATTER FOR FURTHER US FISCAL STIMULUS

There is growing chatter for further US fiscal stimulus. Sectors of the Democratic party are looking to up the coffers of the government with an extra $500b package intended for hospitals and state governments, which adds to the $250b requested by Treasury Secretary Mnuchin for small businesses. This talk is, one would think, supportive for stocks, although this is still early days and detail won’t be fleshed out this week.

A PROMISING COVID-19 TREATMENT GETS FAST-TRACKED

In an official note, Johns Hopkins announced that the promising prospects of a convalescent serum therapy to treat COVID-19 using blood plasma from recovered patients. If early promising studies on the therapy done in China are confirmed by U.S. trials, thousands of survivors might soon line up to donate their antibody-rich plasma. “I absolutely think this could be the best treatment we have for the next few months,” Hopkins pathologist Aaron Tobian says.

EU MINISTERS FAIL TO AGREE on virus RESCUE plan

Unlike the improved risk sentiment in the US, European equities were suppressed in comparison after the markets were disappointed to learn that EU ministers failed to agree on a virus rescue plan. Reuters reported that such disagreement between the Southern and Northern countries even “spurred Spain to warn the bloc’s future was on the line if it did not forge a joint response to the crisis.” No wonder that the performance of the Euro was sluggish in the grand scheme of things.

OPEC+ MEETING IS UPON US, BRACE FOR HIGH VOL

Ahead of the high-stakes historic OPEC+ meeting tonight, which is going to guarantee high-vol activity in the likes of the CAD, NOK, and Oil prices without a shed of a doubt, the latter strengthened. The push higher in Oil may have more to do with the overall ‘risk on’ sentiment and the fragile USD trend than the optimism for a deal. It will come down to Saudi Arabia and Russia coming together by agreeing to cut their output conditional to the U.S. playing its part in cutting too.

USD UNDER PERFORMS AS ‘RISK ON’ DOMINATES

One of the flaws of monitoring the standardized USD index, also known as DXY, is that it fails to account for the overall performance of the USD against a broader spectrum of currencies since the EUR is weighted by a factor of 60+%. This issue is addressed by incorporating instead an equally-distributed USD index vs G8 FX. By doing so, one can observe that in index terms, the USD performance was very poor in the last 24, something not reflected via the DXY as the latter attaches too much weight to the EUR performance, weak too on Wed. The AUD and NZD outperformed amid ‘true risk on’ markets.

CAREFUL MANAGEMENT OF THE CONTAINMENT MEASURES

It is in the DNA of most politicians, especially if you have a Presidential election to run this year (Trump), that you may want to get ahead of the ‘curve’ by re-opening the economy. But, if scientist recommendations or the experience in China serve as a ‘leading indicator’, the likelihood that normalcy will be back rapidly is simply wishful thinking as a cautious approach to the removal of containment measures is warranted to avoid a second mass wave of infections. We’ve seen this playing out in China, Japan or Singapore where after some relaxation, they had to tighten again. This also applies to Europe, with talks of easing measures only gradual. Bottom line: This is a multi-month risk management exercise with ‘business as usual’ conditional to a vaccine made available or countries can really up their game to a whole new level using Taiwan/South Korean as role models.

AUSTRALIA approves $80b jobs RESCUE PACKAGE

The Australian parliament passed a record A$130 billion ($80 billion) jobs-rescue plan late Wednesday. “It’s unprecedented in its scale and its scope, and around six million workers should be able to use this program to stay in a job,” Treasurer Josh Frydenberg said in a television interview. The package “will help build that bridge to the recovery on the other side.” All the details in this Bloomberg report. The Australian Dollar cheered the news by spiking into new highs.

FOMC A NON-EVENT AS WIDELY EXPECTED

Even if quite backward-looking, the FOMC minutes revealed that trading conditions across a range of markets were severely strained. The main highlights included that “a number of primary dealers found it especially difficult to make markets in off-the-run Treasury securities and reported that this segment of the market had ceased to function effectively.” Moreover, it detailed that “all participants viewed the near-term U.S. economic outlook as having deteriorated sharply in recent weeks and as having become profoundly uncertain.” Full text.


Recent Economic Indicators & Events Ahead



Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!


Insights Into Forex Majors

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries (watch my setups) thoroughly backtested, to decide if a market meets the prerequisites to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.

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Important Footnotes

Market structure
Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

Support/Resistance
Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.

Fundamentals
It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

Projection Targets
The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection
 
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