Free Profitable Forex Newsletter
Hey! This is Philip with this week’s edition of the Free Profitable Forex Newsletter!
Volatility has declined, but potential for big moves still alive; Staying cautious and keeping risk low
Fx activity has calmed down notably in recent days, perhaps as markets have found a temporary new equilibrium concerning the war in Ukraine and subsequent sanctions on Russia. A lot of the bad news, such as reduced oil and gas supplies and the negative impact on the global economy, is now priced in and expected by investors. But the outlook further out is much less clear, and many risks
still lie ahead.
Trading ranges in the Fx market have declined, likely partly due to the risks now being priced in and partly because of investors’ unwillingness to add new positions in the face of high uncertainty. EURUSD’s range is only around 100 pips this week, down from the above 200 and even 300 pips seen in the previous 4 weeks. This is indicative that
the market has entered a consolidative phase, though how long it would last remains highly uncertain. For instance, the hostile activities in Ukraine could quickly de-escalate or quickly escalate further from here. It is very hard to tell which way things go with geopolitics. Likewise, it can be harder and riskier to trade markets on geopolitics, so this again is a reminder for traders to keep risk in check.
The course of the war in Ukraine will continue to impact the direction of Fx trends
While trends in some pairs continue, the volatility has declined there too (AUDUSD, NZDUSD, USDCAD). The only outlier is the JPY, which has extended its steep decline at an even faster pace this week, with USDJPY even poking above the 122.00 level. But for now, we’ll save our lengthy discussion of the yen the weekly analysis published on
Monday.
Despite the current calm in markets, we could see new big moves in the weeks ahead (perhaps a calm before the storm). This would likely come from developments with the war in Ukraine. Among others, there are two contrasting scenarios that currently seem most likely to unfold:
- A peace deal and withdrawal of Russian troops from Ukraine would be the best-case scenario. This could see the EUR and other European currencies rallying if a peace deal is accompanied by the US and EU lifting sanctions on Russia.
- At the same time, however, a scenario of more escalation is probably equally likely, in which case, we could see a complete halt of Russian gas and oil flows to Europe (remember, the EU is still buying large amounts of Russian energy).
In the end, a return to the pre-war environment looks highly unlikely. The EU and Western allies have already committed to reducing dependency on Russian energy products as part of a long-term strategic orientation for the future. But these plans will take years to be implemented.
In the meantime, the move away from Russian oil and gas implies that energy prices will stay high for longer across Europe. This should keep the EUR under pressure versus the USD and other commodity-exporting countries (AUD, CAD). A complete ban on Russian oil and gas imports could make the EUR outlook even more bearish in the near term as energy prices would likely soar under such a
scenario.
GBPUSD has behaved in line with scenario 1 we outlined last week, reaching the
upper end of the 1.3150 - 1.33 area. However, the reversal has not been quick to come so far, and GBPUSD is still trading inside of the rising retracement channel (4H chart see below).
The bias remains bearish here, and we continue to look for an entry point on the short side. A bearish break of the retracement channel would likely signal the next leg down and eventually lead to levels of 1.30 and below, as described in last week’s newsletter.
Trade signals from the past weeks
- March 10, 2022 (entry after ECB) - Short EURUSD from 1.1040, ½ position already closed near first target at 1.09; stop on remaining ½ position above 1.1150, targeting 1.08 and below (trade open in progress)
- Short GBPUSD, not triggered yet (trade idea sent Mar 16)
TOTAL: 0 pips in the past week
TOTAL: +5310 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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