Market participants expected Hillary Clinton to win. What a surprise they were when Donald Trump took the lead after falling behind for a long time (in terms of votes). When the financial world realized that Trump would win, he responded with a big risk-taking step. The shares sold dramatically, with large amounts of money flowing into shelter assets such as the Japanese yen and gold. The US dollar weakened significantly against all major currencies except the Canadian and Australian dollars. These two were even weaker than the dollar because, as a commodity currency, they are particularly exposed to declining risk-taking. The Japanese yen, Swiss franc, British pound and euro strengthened significantly against the dollar in a very short time. For example, the yen gained more than 400 seeds against the dollar in just a few hours.
However, investor sentiment quickly turned from risk to risk. These aggravated moves soon reversed, and some of these currencies eventually lost even more room against the U.S. dollar than they had originally acquired. One such currency is the euro. Let’s take a look at EUR / USD:
EUR / USD hourly chart
Here you can see the huge europope on Wednesday. Obviously, many long traders have been caught on the wrong side of the market. Many of these traders were pushed out of their positions as the market turned sharply during the day. Therefore, I never rely solely on basic analysis when making trading decisions. Many times, the market either overreacts to basic catalysts or ignores it. Sometimes they react to a particular catalyst, but much weaker than expected. Can the market ever give funds in reality? Technical analysis, on the other hand, is a much better way to assess where the market is heading. They update more often, which means we can quickly see if something really important has happened in the market. For example, if someone’s short position is running on EUR / USD and the price is gradually moving down, it’s a very big 5 minute, the appearance of, say, a 60-core, pearl candle would really preoccupy the trader. This could indicate a reversal of the trend or that a very sharp correction may be in the way. Here is the daily graph of EUR / USD:
EUR / USD daily chart
The EUR / USD currently appears to be very negative and many traders who bought for the initial rebound were stopped when it turned around. This liquidation of positions only gave impetus to the sharp sell-off following the initial rebound. The couple’s prospects remain negative for the time being, and maybe we can see good opportunities in the coming days.
GBP / USD
Throughout the turmoil and volatility of the week, the British pound performed quite well. While the U.S. presidential election did indeed punish the euro, it actually helped the pound gain even more ground. See the daily GBP / USD chart:
GBP / USD napi diagram
The chop was high on this pair on Wednesday, but on Thursday the pound firmly outperformed the dollar. The British pound will certainly have a lot of underlying strength, and GBP / USD and other pound pairs could certainly offer excellent trading opportunities in the near future. GBP / USD gave a good strong day on Thursday and rose about 147 highs.
USD / JPY
The pair also reversed the initial losses they suffered on Wednesday. See the following table:
USD / JPY hourly chart
This week we really saw some big moves in the FX market! Where there is market movement, you need to make money and increased volatility can reach your goals faster.
Notice that 20-EMA (the blue moving average) functioned as a dynamic support shortly after the price broke through. The area is indicated by a red rectangle in the figure above.
I’m excited about all the fluctuations and we can get some tradable tracking in the coming days. Perhaps we can get juicy withdrawals on the hourly graph of 20-EMA, for example. Only make sure that the market continues to set higher and lower levels if you choose to enter in the long run.
For all practical reasons, we do not have important economic data for tomorrow (Friday). Mr Poloz has a speech from the BOC (Bank of Canada) at 15:50 GMT which could cause some market movement, but I doubt we will see much action from him.