Trading Risk Sentiment From Geopolitical Tensions

We’re going to demonstrate how Forex Source subscribers made money trading a sentiment shift involving the Geopolitical Tensions between the US and Iran this week...
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We’re going to demonstrate how Forex Source subscribers made money trading a sentiment shift involving the Geopolitical Tensions between the US and Iran this week…

The move we’re going to be looking at is this one here on AUDJPY Pair. So, let’s break this down and see how you could have predicted and caught this move, using our market commentary.

So, firstly we need to understand the context or the baseline surrounding this pair before the move took place… Now 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 AUD was to the downside given that the market had started to increase their expectations for a possible 25bsp rate cut by the RBA in February 2020. Furthermore, we saw that the AUD was also pressured, and the JPY 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 AUD was being driven lower by the risk tone and by increased rate cut probabilities and that the JPY was supported by the risk sentiment at the time. Now also in the terminal under our video commentary section we release two videos on the 7th highlighting the current downside bias on the pair and also highlighting a couple of possible entry and exit points for how you can look to enter and manage the expected move.

Once the baseline was in place the next step is to identify the type of breaking news that would generate the biggest market moving shift…

So, for this we can go back to the terminal again on the 7th where we released our Tradable Sentiment Shifts report which clearly highlighted that the we needed to watch out for any rhetoric from the US or Iran or any material chances to the situation. Specifically, we explained that any announcements which suggest a further escalation of the situation is likely to see a flight to safety by market participants…which would have seen further possible downside in the AUDJPY.

So now all we needed next was the trigger, in other words, the sentiment shift that we identified ahead of time, to actually take place. So, also in the terminal, later on the 7th and 8th of January we had the first report come through on the terminal of rockets hitting a US air base in Iraq. Now after this report, 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 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 AUDJPY to the downside.

Looking at the chart, we saw where the very first news release hit the wires, now the main reaction to this only occurred two hours after the first reports, which means you had more than enough time to digest this information and jump in on the AUDJPY 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 AUDJPY which means you knew exactly where a good place would be to take some profit off the table and bank some pips on this move which resulted in about an 80 pip move.

So, if you’re interested in learning more about how our market commentary can help you interpret news and fundamental analysis into profitable trades like this, click the menu above and check out Forex Source.

Thank you, please post your questions or comments below because we read them all and actually base our future posts on what you ask for.

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