Free Profitable Forex Newsletter
Hey! This is Philip with a market update of the Free Profitable Forex Newsletter!
Coronavirus Confuses Markets
Potential Opportunities In USDCAD & EURJPY
[+Technical Analysis]
Unclear and confusing price action is the theme in the Fx market again, perhaps only excluding the EURUSD pair, where we’ve seen a steady downtrend in the past several days (as we anticipated in our weekly analysis).
But, even that move may be about to enter an overdone phase fairly soon, but we’ll discuss that in more detail in our analysis next week.
Coronavirus Depresses Fx Pairs
For now, pretty much all the other pairs are trading in small ranges without much direction.
The coronavirus continues to be on everyone’s mind and hurt risk appetite again overnight on reports of a big increase in newly infected cases in China. However, this increase is attributed to a change in the calculation methodology, so the markets’ risk-off reaction is contained so far because of this.
While markets rallied last week on some positive news, such as that researchers have found a drug that is effective against the coronavirus, the situation is far from being completely resolved, so some price swings in both directions can be expected for a while more.
How would the market react to possible coronavirus outcomes?
For the time being, risky currencies (such as AUD, CAD, NZD) remain at depressed levels. They will have scope to rally against USD in case the coronavirus worries abate on a positive development from the current situation. On the other hand, in general terms, JPY would have scope to strengthen in case the coronavirus situation worsens.
This dual/binary outcome of this situation is what’s keeping movements contained for now as the markets await a clear direction on this issue.
For the above reasons, I am not recommending a specific trade idea this week, but instead, we’ll take a closer look at the USDCAD and EURJPY pairs below, which could provide opportunities for some of you.
USDCAD Near Resistance & Looking Topish
USDCAD has hit resistance and is currently at slightly expensive levels here near 1.33. The fair value for the pair is roughly around 1.30, so this would be the scope for a decline in case of a favorable resolution of the coronavirus crisis and a subsequent positive market reaction.
Two things have subdued the Canadian Dollar recently - mainly the fall in the price of Crude Oil and the coronavirus outbreak. For USDCAD to reverse down and move toward 1.30, we will need those two factors to reverse to some extent at least - so, a rebound in Oil and some positive developments on the coronavirus.
Below, we take a look at the daily chart and the key technical levels:
USDCAD Daily Chart & Levels
EURJPY Gathering Bearish Momentum
The EURJPY pair is also interesting right now as a risk-off trade; it is falling too in the past several days, tracking EURUSD. While from the charts, the bearish move looks likely to continue, we have to keep in mind that on a positive risk-on reaction, this move could quickly and sharply reverse higher.
In essence, EURJPY is now very sensitive to developments on the coronavirus and equity markets. The fact that USDJPY is near the 110.00 resistance and EURUSD looks to have some more scope to fall (to around 1.08) favors further bearish price action in EURJPY. But, this move has already started, so setups to join the move is what we need here.
The technical situation with the important support levels to the downside is shown on the chart below:
EURJPY Daily Chart & Levels
Trade signals from the past week
- February 05 - Short Gold (XAU/USD) on a potential bearish breakout of $1550 (not triggered)
TOTAL: 0 pips in the past week
TOTAL: +2550 pips profit since October 1, 2018
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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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