Trade Example: Trading Risk Sentiment From Geopolitical Tensions

Trade Example: Trading Risk Sentiment From Geopolitical Tensions


(logo whooshing) – [Arno] In this video,
we’re going to demonstrate how Forex Source subscribers made money trading a sentiment shift involving the geopolitical tensions between the U.S. and Iran this week. Now, the move we’re going to be looking at is this one here on Aussie/Yen pair, which is basically an 80
pip move to the downside. So, let’s break this down and see exactly how you
could have predicted and caught this move, using
our market commentary. Just before we begin, don’t forget to hit that button to subscribe or follow, so that you’ll get notified every time we release a new video. So, firstly we need to
understand the context or the baseline surrounding this pair before the actual move took place. If we quickly take a look
inside the Forex Source Terminal on the 6th and 7th of January, we released our Dominant
Currency Sentiment reports. And in these two reports we saw that the current short-term baseline for the Aussie dollar
was to the downside given that the market had started
to increase their expectations for a possible 25 basis point rate cut by the RBA in February 2020. And, furthermore, we also saw that the Aussie was being pressured, and the Yen supported at that time by the ongoing uncertainty in the markets regarding the Geopolitical tensions between the US and Iran. So, based on this we knew that the Aussie dollar
was being driven lower by the risk tone and by the
increased rate cut probabilities and we also knew that the
Yen was being supported by the risk sentiment at the time. Now, also in the terminal, under our video commentary
section, we released two videos on the seventh of January highlighting the current
downside bias on the pair and also highlighting a
couple of possible areas for entries and exit points on this trade and to look how to enter
and manage this trade and that expected move to the downside. Now, once the baseline was
in place the next step was to identify the type of breaking news that would generate the
biggest market moving shift. Now, if we go back to the terminal, on the 7th of Jan we can see that we released our Tradable
Sentiment Shifts report. Now, in this report we clearly highlighted that the we needed to
watch out for any rhetoric from the US or Iran or any material changes
to the current situation. Specifically, we explained
that any announcements or events which suggested
that a further escalation of the situation is likely,
we will likely see a flight to safety by market participants which would have seen
further possible downside in the Aussie/Yen pair. So now all that we needed
now was actual the trigger, in other words, the sentiment
shift that we identified ahead of time, to actually take place. Now, for that we can go
back to the terminal, on the seveth and the eighth
of January, and we can see that we had the very
first report come through on the terminal of rockets hitting a U.S. air force base in Iraq. And after this, we had several
other reports come through over the feed over the next two hours of more missiles hitting
American airbases in Iraq. Now, we knew that the further escalation between the two sides
would prove to be negative for the overall risk sentiment and also that it will put pressure on the Aussie/Yen pair to the downside. Now going back and looking
at the chart, we can see that within that very first box, this is where the very first
news release hit the wires. Now the main reaction to this, that main move to the downside,
only occurred two hours after the initial reports hit the wires, which means that you had
more than enough time to digest this information and jump in on the Aussie/Yen and
ride any potential moves to the downside. What is important though
is that we also highlighted potential support areas to watch out for on the Aussie/Yen which
means you knew exactly where a good place was to take some profit off the table and bank some pips on this move to the downside which resulted in about
an 80 pip move overall to the downside. So, if you’re interested in learning more about how our market commentary and analysis can help you interpret news and fundamental analysis and turn that into profitable trades like
this, click the link below and check out Forex Source. Thank you so much for watching and please post your questions or your comments below this video. We do read all of them and actually base our future videos on what you guys ask for.

Leave a Reply

Your email address will not be published. Required fields are marked *