Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade update of the Free Profitable Forex Newsletter!
The liquidity injections from the Fed have helped to stabilize the sharp USD appreciation, and so far in this week’s trading, we see some retracements across the board of the rapid moves. Governments have also unleashed unprecedented fiscal stimulus to weather the negative economic impact of shutting down the entire hospitality industry and other sectors. Hence, stocks have been able to rebound somewhat this week as
well.
Without Progress On Battling The Pandemic, Dollar Is King
The markets are now awaiting some positive news on the coronavirus in the direction of containing the pandemic and slowing the spreading rate, or possibly even a breakthrough on coming up with a vaccine. Such news would have a major impact for the return of risk appetite, which would also be reflected in currencies. Most notably, the US Dollar would likely retrace the gains it made over the past two weeks in such a
scenario.
However, that scenario still seems a bit far-fetched. For the time being, no one knows how long the war against COVID-19 would take and how long the economy will be kept closed. The Dollar will not go out of favor in such an environment. In fact, the Fx moves this week could prove to be only a consolation within a broad USD uptrend. For now, the Dollar is still King and the preferred currency for as long as the COVID-19
pandemic continues to spread at a rapid rate.
So, if you are looking to buy the Dollar, which currencies and what levels should you be looking at?
Below we look at the Pound Sterling and the Canadian Dollar as the best-positioned pairs to express long USD, as both GBP and CAD have been double hit in the new market environment.
Sterling started to recover with an initial bounce on Friday, and GBPUSD continues to consolidate this week. However, the double hit of the mounting twin deficit and risk aversion has made GBP one of the biggest losers of the major G10 currencies in the past couple of weeks. If we add Brexit uncertainty to the picture, that makes it a triple hit for Sterling.
With the largest budget deficit in the G10 nations and if risk aversion persists, GBPUSD can depreciate further toward the 1.10 area.
Look to sell the pair on bearish patterns or signals toward the 1.20 zone and above. Cable already touched this area today, though a second test is still possible.
The Canadian Dollar was beaten badly over the past few weeks by the deterioration of risk sentiment from one side and the dump in oil prices from the other side. Being a high-beta “risky” currency in Fx, and also closely correlated with oil prices, the current market environment is a bad cocktail for the Canadian currency. Thus, it’s easy to see why it is down by around 1,000 pips against the greenback.
Look to buy USDCAD toward 1.40 and below (1.38 - 1.40 area), preferably on some bullish patterns or developments. Of course, it may not even reach this area before it continues higher, but all that will depend on how the coronavirus and risk sentiment unfolds from here forward.
Risks to long USD positions:
- As discussed above, the coronavirus pandemic is now the primary driver of markets, and big news (good or bad) on this front will have an immediate impact on the markets.
- Flip in sentiment (say a sudden improvement in the coronavirus battle) would result in USD depreciation, as noted earlier.
- Intervention - There is also the possibility that US and other policymakers will intervene to weaken the Dollar if it appreciates too much too soon. This would especially come into focus on moves below 1.03 in EURUSD and above 115.00 in USDJPY.
Note: We are not recommending trade signals with specific levels this week either, as these two potential trades have not reached maturity yet. Also, the outlook is quite uncertain, given how quickly things are happening. Hence, it would be best to trigger these trades based on news developments instead of only based on the technicals.
Our trade signals from the past week
TOTAL: 0 pips in the past week
TOTAL: +2825 pips profit since October 1, 2018
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Thank you!
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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