Scan Of The Markets

There is no respite in the USD weakening trend, now a very mature one, as the currency still loses value across the board, resulting in new lows in the prop index I personally monitor that aggregates the flows.

This downside action in the US Dollar comes, once again, as a result of another positive day in the US equity space, where the S&P 500 recorded gains of 1.20%, landing right at a key resistance of 3,220.00, a level I suspect may prove challenging to break.

Even if I am not going to stick my neck out sounding like a hero at this stage and over-committing to any contrarian call, let me say this. The S&P 500 has now landed at what I believe to be the most critical resistance in over 2 weeks when 3,000.00 got tested.

This means that you should nonetheless be prepared and not surprised at all if around this 3,220.00 area in the S&P 500 we see a roll-over of equities that leads to a wave of strength in the USD. Again, pure speculation at this point as there are no technical anchors to support this scenario for now. Just something to be vigilant for.

The reality in the charts is that we remain in true ‘risk on’ mood and that’s reflected in how overstretched the rally in the Oceanic currencies look. Hence, why one cannot be dismissive of a transition into a period of distribution relatively soon. However, even if more two-way business was noted in commodity-linked FX, the close above 0.70 in the AUD/USD appeats to be another bullish testament of intent.

We have come a long way in a short time, but until there is objective technical data to back up contrarian views, and until evidence emerges that structures are compromised and momentum lost, the path of least resistance remains to join the bid in risk.

Anyway you slice it and any USD-denominated chart you look (exclude USD/JPY), it paints the same gloomy prospects. Being systematic in one’s approach should have paid off handsomely as of late, so there is no reason to switch that mentality for now.

The EUR/USD, after finding acceptance beyond 1.1250, is currently finding its footing above the 1.13, with a notable positive divergence to be exploited against a very weak USD. This has already translated in buy on dips opportunities on the retest of 1.1270-75.

As in the S&P 500, the GBP/USD faces a very similar resistance structure circa 1.2730-50, an area susceptible to act as a role reversal level even if there is no backing whatsoever by technicals at this point. The pair has been rising for 8 days straight.

A pair I see swiftly moving towards a buy-side area judging by intermarket analysis and how out of whack when crosschecked against its leading currency index is the USD/JPY. It is headed into sub 108.00 support displaying a huge positive divergence vs JPY index.

So, if the above scenario eventually plays out and EUR/USD finds the dip buyers I envision and USD/JPY also sees the bid tone improve, one can conclude that monitoring buy side opportunities in EUR/JPY could be an even better way to express longs?

If you are interested in a deeper analysis where I account for structures, momentum, volatility and intermarket, I’ve dissected and divulge my thoughts with all of you in the video below. The bottom line after going through the S&P 500, EU, GU, UJ, AU, is to stick with what’s worked and that means look for exposure in the established trends.

Insights Into Market Flows

This analysis is conducted on a multi timeframe dimension. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter a position, hence the video is mainly intended as a way to educate traders in upping their analytical skills.

Video Length: 00:18:23

Recent Economic Indicators & Events Ahead

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Source: Forexfactory

Important Footnotes

MARKET STRUCTURES

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

SMART MONEY TRACKER 

In order to assess the market momentum of a particular asset, I’ve promoted for years the idea of using what I call the smart money tracker. The settings and the indicator can be obtained via our Discord room, where traders from all walks of life interact frequently. In this video I lay out the elements I look into to call trend directions.

SUPPORT & RESISTANCE

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

FUNDAMENTALS

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

PROJECTION TARGETS

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