Brexit, US Treasury Yields and the US Dollar

Eu officials stated on Friday that the UK is close to sealing a brexit deal with the Europe. The reports firmed GBP against a basket of currencies. Although it has been officially denied, a second brexit referendum is possible. The brexit saga is likely to come to an end in November.

The most extraordinary part is the New Zealand Dollar (NZD) weakness, which caught us off guard.

The volatility in NZD is attributed to the trade tension between the US and China. However, unless this was an intervention by the RBNZ (which has occurred in the past), the heavy buying in GBPNZD forced EURNZD higher. It is extremely rare for one cross to have such an impact on another cross with the same secondary currency.

There is a minor possibility EURNZD may correct lower but we are preparing for the possibility EURNZD may maintain its uptrend, in tandem with GBPNZD. We will wait for the opening of the market to adjust the protective stop as we wish to contain the potential loss. A drastic event may be required to force EURNZD lower.

Outside market events are continuing to dominate the market. US and Chinee officials are expected to meet on Monday in an effort to ease the tension between the countries. Italy’s budget may continue making headlines along with brexit statements. Strong  gains took place in US treasury yields towards the end of last week, which was extraordinary.

The US Consumer Price Index (CPI) on Thursday is the key economic figure for the upcoming week.

USDCAD Weekly Chart

Please click on the chart to enlarge:

Brexit, US Treasury Yields and the US Dollar

USDCAD Daily Chart 07/10/18

We have mentioned in our recent updates that we were waiting for a dip in CAD pairs and crosses. Due to AUDCAD and NZDCAD recent weakness we are focusing on USDCAD. We suspect USDCAD potential weakness may be tied to a weak USD rather than a firm CAD.

This is a weekly entry but we are displaying the daily chart. The key resistance levels are 1.2975 and 1.3060. We are relying on the US PPI and CPI figures to trigger the initial wave of USD weakness. Any easing in the trade tension between the US and China may also trigger USD weakness as we have seen in recent months.

We have also noted a potential long entry in EURUSD, however, due to the holding costs of the long trade we prefer USDCAD.

We will issue an update after the opening of the Forex market.

USDCAD Trade Alert

Please click on the chart to enlarge:

Brexit, US Treasury Yields and the US Dollar

USDCAD Daily Chart II 07/10/18

USDCAD short at market price (bid 1.2937)
Take profit: 1.2510
Protective stop: 1.3092
Risk Ratio (RR): 1: 2.95 (approx.)
Estimated duration: 30 days

Relevant as long as USDCAD is above 1.2870.

Note: This is a weekly entry, the potential drawdown is a re-test of 1.3000.

The price traded from 1.2944 to 1.2937 as the trade was emailed to all members. We therefore chose to display 1.2937 as the entry price on the website although the chart shows 1.2944.

16/10/18 SIGNAL UPDATE: USDCAD is trading at 1.2939 at the time of this writing, we are closing the short trade at market price.

All of the above trade updates on this page were issued via email to our members.