Weekly FX Recap: Take, Reduce, Eliminate…Understanding the FX Universe à la Charles Darwin – Op Ed.

Noam Stiekema

Outside the box behavior and mantra suggest one theory to solve this dilemma; Darwin’s evolution theory. That’s right.

weekly-fx-recap-gold

By José Ricaurte Jaén, Senior Algo Trader at The Guardian Advisors & TradersDNA

Many keep thinking is just about repeating the same old technique or strategy over and over again, but believe it or not, structures, products, assets and relationships including yourself may evolve even if you do not accept all tangible evidence. There is a compelling theory about the evolution process that seems to apply to everything we do and yet after all these decades nobody appears to thank the man behind it; Charles Darwin.

Have you thought about the immense value the FX market offers? Perhaps the asset implied volatility is too high or the life expectancy of your account set at less than six months are the issue; who shall we blame? Literally, outside the box behavior and mantra suggest one theory to solve this dilemma; Darwin’s evolution theory. That’s right.

See, the brainwashing process is so efficient (after 40 decades listening to the same tape: save, work hard, buy a house and other) so individuals accept all facts, statistics and foggy arguments about what they should expect versus exploring on their own terms. Therefore, no one seems willing to TAKE risks, please do not jump from the cliff, far from the truth; measured and intelligent risks are healthy choices.

Changes scare everyone, so it delays the inevitable and individuals tend to find no reason to REDUCE their excess in other areas (talk about life areas, useless friends, comatose investments or anything distracting you from your designed life) you see no interest to evolve and how could you if it ain’t broken…

But when things go wrong at the last minute, then and only at that last moment you are going to start asking questions, by that time is too late. You carefully missed your chance to ELIMINATE waste, and now there is no room to improve; sad.

How difficult can it be? Veterans called it “industry” when “Universe” seems more appropriate. It might be just the circumstances. However, there is no escape from the evolution process; you should meditate on it.

EURUSD: Another death cat bounce!  

H4 – Resistance: 1.14422 Support:  1.09762

EURUSD!H4_FinanceFeeds_Forex_Bl ack_Book__José_Ricaurte_Jaén

According to the definition when applying “Reversion to the Mean” (valid trading strategy utilised by Mutual and Hedge fund managers) indicates that price disruption high/low tend to be for a temporary time, then it goes back to the average range.

Now, would you like to explain why the EURUSD is trading at 1.13230 (Friday’s closing price)? Let’s quickly go over a few ideas:

  1. There is no value to keep long positions since the single currency provides no actual swap.
  2. It should not be called European Community; someone jumped ship.
  3. Isn’t Italy still a member? If YES, get ready the last chapter in this ongoing drama is about to begin.

If you want to TAKE risk probably going long crude suits you better, at least some stats mentioned how U.S. crude oil inventories dropped 1 million barrels which can be translated into a bullish sign. But, where is that positive tick for the euro? If you have it, feel free to share it in the comments section as I might be blind and deaf, I haven’t received the memo.

On the Technical View, the currency pair just entered in the short-term a price range between 1.13532 to 1.12982. There is, in fact, a sell signal from the Forex Black Book, but one cannot avoid having doubts from previous entries. If this is the week when things turn around, 1.11202 seems the obvious target for short sellers. On the other hand, if William’s words are empty 1.12982 can be another break for bulls to add more long positions towards 1.14422, no matter what happen next the only reason why the EURUSD is moving higher is due Yellen’s lack of action; don’t talk to me about euro strength ‘cause there is no evidence whatsoever to support it. (if you do have it let me have your comments)

EURAUD: Why is anybody still long this cross? 

H4 – Resistance: 1.49797 Support:  1.43697

EURAUD!H4_FinanceFeeds_Forex_Bl ack_Book__José_Ricaurte_Jaén

On the Technical View, there is a “double top formation” in place close to the resistance zone. However, 1.49797 seems the better entry to add massive short positions if you are expecting the downtrend continuation.

When trading this currency cross, as any volatile cross, I always make sure to REDUCE the trade size to have a decent stop no matter what direction I may pick.

The way it looks so far the market is attracting liquidity to start its next leg lower. Medium-term we cannot discount prices trading close to 1.5000, but as I mentioned the Long-term outlook empowers the Australian Dollar because no matter what happens next, It is better to hold a currency at 1.50% than one with zero rates.

USDJPY  

H4 – Resistance: 103.366 Support:  99.596

USDJPY!H4_FinanceFeeds_Forex_Bl ack_Book__José_Ricaurte_Jaén

Today, some retail traders are expecting a gap to the upside, and I wonder why? Well, because they think there is an imminent action from the Bank of Japan as the Japanese Yen trades in the critical territory at 100.15.

No doubt, you can always see the BoJ coming out their way with some random action, but long-term what’s really happening behind the curtains?

On the Technical View, reports and Elliot Wave traders (which all of them should be rich by now; of course, not the case) have the last leg going deep into 97.50 I do have to share that I still have my stop at 99.513 so now you know.

If indeed the pair recovers, then it may move as high as 103.229 where it is going to find lots of sellers selling the level as it is going to challenge its 50 SMA on a longer timeframe. Short-term this currency walks over a fragile scenario just be ready for everything.

XAUUSD: sideways, but it’s not your fault.  

H4 – Resistance:  1367.43 Support:  1329.73

XAUUSD!H4_FinanceFeeds_Forex_Bl ack_Book__José_Ricaurte_Jaén

Thinking it is Credit Suisse or UBS that have a research team coming out with $1475.00 target price later this year for Gold. How many overpriced analysts do you need to get that number?

You may dislike my analysis, or you may just read it for fun, but I am going to repeat it again, short-term Gold is in a bearish trend. The only way I believe Gold provides value is if you buy the physical. That’s it. In the event that you want to hedge your wealth, I strongly suggest you focus on quality real estate with no leverage or financing in the location.

Short-term, Yes, I have no issues trading the electronic quote. Now, you can ask me: Jose; Why is that? Sure, no problem I have an answer. Think about this for a minute, how bright are you if it is trading at 1341.41 (at least this is what my online broker is quoting me) and you are calling a Year End price of $1,475.00 that’s only +130.00 to the upside and your risk goes all the way down to $1,000.00 do the math, I am positive your calculator works as good as mine…What’s the risk/reward ratio?

I rest my case. And please, remember I am not saying it is a bad investment, if you think about it Gold is not even an investment is just a must because the undeniable truth; it ELIMINATES all wealth worries for future generations.

Happy days for risk-off forex traders, but as everything in FX; it may not last long.

José Ricaurte Jaén is a Professional Derivates Trader and Associate Editor at Tradersdna in London. Back in 2006, he started his career as a Junior Stock Broker at Thales Securities; Saxo Bank’s first white label partner in Latin-American. José’s background experience is in technical analysis, multi-currency trading and asset allocation. During 2008 and 2012, managed as a Senior Stock Broker, 38M AUM allocating funds in Corporate Bonds in Japan and Canada. 

He published unique trading content for well-known regional newspapers: Capital Financiero (Panamá), La República (Costa Rica), Sala de Inversión América (Latinoamérica) and co-developed financial TV segments with Capital TV. 

Recently José Ricaurte has been creating, and co-managing a new trading academy in Panama with Principia Financial Group and publishing his FX trading column on FX Street ES; Laberinto de Divisas. Also, on a weekly basis, he publishes his Weekly FX Recap on Finance Feeds.  Over the last 4 years, he has been working as Senior Sales Trader at Guardian Trust FX, where he designs and manages dynamic trading strategies using his algorithm; Osiris EA.

Read this next

Fintech, Uncategorized

BitMEX integrates HALO from Solidus Labs for cross-market surveillance

““The recent approval of the Spot Bitcoin ETF has piqued the market’s interest. As a result of price volatility, the trading volumes for crypto derivatives have gone up substantially. HALO, with its advanced technology and crypto-native detection architecture, will enable BitMEX to smoothly and safely scale trade surveillance across its increased trading volumes and provide the necessary safeguards for new product launches.”

Industry News

Horizon Software rebrands to Horizon Trading Solutions

“Horizon Trading Solutions has seen accelerated global growth over the past year to meet the rising demand for our trading solutions and built-for-purpose technology offering. The choice to rebrand represents a key part of this development, while maintaining our heritage and history in the industry.”

Market News

USDJPY has surged to levels last witnessed in 2022. Should we consider opening a short position?

The recent resurgence of the US dollar has propelled USD/JPY to new heights, touching levels not seen since 2022. This surge comes against the backdrop of stable short-term yields and ongoing economic data that fails to signal a significant slowdown, prompting questions about the extent of current monetary easing measures.

Digital Assets

DED Trends on Twitter After Memecoin Snapshot Announcement

Polkadot-backed community coin #DED, made it to the trending charts on X, demonstrating community’s engagement and interest behind the memecoin. 

Digital Assets

BlockDAG Presale Nears $10 Million Amid Toncoin’s Momentum, Green Bitcoin’s Presale, and the Rise of Other Top Cryptos

This article will examine three top trending topics: Toncoin’s potential, Green Bitcoin’s innovative presale, and BlockDAG’s sustainable mining approach. These cryptocurrencies take centre stage for their uniqueness and innovation.

Digital Assets

Coinbase scores minor victory vs SEC, but lawsuit to proceed

A federal judge in Manhattan, U.S. District Judge Katherine Polk Failla, ruled on Wednesday that the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Coinbase can largely proceed.

Web3

COTI Teams Up with Civic for Enhanced Digital Identity Control

СOTI and Civic are teaming up to enhance digital identity security in Web3, aiming to provide users with more control over their digital selves through innovative technology.

Digital Assets

BlockDAG Takes on Chainlink (LINK) Crypto, and RON With DeFi Card and 5000x Profit Potential

Explore BlockDAG’s innovative DeFi card, which transforms cryptocurrency into spendable cash, alongside Chainlink (LINK) crypto and Ronin’s advancements.

Digital Assets

Court finally decides on Sam Bankman-Fried sentence, experts predict 20 years

Sam Bankman-Fried, the former CEO of the now-defunct cryptocurrency exchange FTX, is set to face sentencing on Thursday in a pivotal moment that could see the entrepreneur beginning a lengthy period in federal prison.

<