The Daily Edge

The first thing that comes to mind when analysing the currency space is how focused the market has become to the immediate future. In other words, short-term economic jitters due to stricter lockdowns in many parts of the world appear to be overriding any hopes for the longer-term vaccine-fuelled positivism and Trump’s presidential departure.

To see an expanded version, right-click and select ‘open link in new tab’. The indices show the performance of a currency vs a G8 forex basket. Indicators are available to use these measures via Tradingview and MT4. 

The underperformance of the Aussie, despite positive economic news in the form of an upbeat Australian jobs report, is a telling sign of precisely the narrative I am referring to. The market remains very cautious to commit capital into risky assets at a time when the surge in COVID-19 cases globally may see economies take another hard hit.

Very narrow ranges dominate

Another observation that reflects the convoluted state of affairs in the forex market includes the narrow ranges. Even if the Aussie was the weakest on Thursday, the net gains in the rest of forex indices were so minuscule, that the extension of the AUD bear trends became largely limited when compared to normal dynamics. In fact, by matching the EUR (strongest) vs the AUD (weakest), the EUR/AUD only rose 60 pips for the day, which is way below the daily ATR.

This week has been unusually quiet in the forex market. It’s a major rarity to see the overall performance of currencies being encapsulated within excruciatingly narrow ranges of -/+ 0.10% through the London session. Remember, this session in the UK is characterised by being the most volatile for currencies given the amount of customers’ volumes. As traders we must remain patient and let the market come to us. This is one of those times when patience pays off.

Hot trade of the day

In this section, I pick a market or several ones that presented an opportunity based on the concepts I teach. My video analysis below elaborates on the logic behind the trade.

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Ivan Delgado