China GDP Trading Strategy: FX and Commodities

China GDP Trading Strategy

China Gross Domestic Product (GDP) is due to be released during the Asian session. The PBOC took extreme measures throughout the year to sustain the economic growth China has benefited from over the years. China has affirmed further monetary action is likely to take place. We have noted positive divergence in gold and silver daily charts. EURAUD weekly close below 1.4435 is another signal for further weakness in the Euro, inline with other EUR pairs and crosses. Due to the Italian referendum the Europ against a basket of currencies.

The technical entries in XAU/USD, XAG/USD and EURAUD are quite complex. The commodities are trading at their resistance levels while there are indications of an intraday bullish reversal in EURAUD. We suspect the resistance will give way in the commodities. EURAUD gains may be limited or we are witnessing a false signal at an intraday level.

XAU/USD 4hr Chart

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XAU/USD 4hr Chart 18/10/16

XAU/USD 4hr Chart 18/10/16

EURAUD Daily Chart

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EURAUD 4hr Chart 18/10/16

EURAUD Daily Chart 18/10/16

Gold weakness following the technical breakout on the daily chart has been acquired, which creates room for corrective gains. Aside the positive divergence, there is a risk for a bearish flag due to the current range of the precious commodity. By initiating a long trade it means we are anticipating a breakout of the resistance within the next 48 hours. While the GDP and the press conference could be the obvious trigger, there has been incidents where the PBOC has slashed rates prior to key releases. A rate cut will strengthen XAU/USD while triggering a rally (often short-lived) in AUD.

The Euro appears to be heading lower following a bearish breakout in EURAUD and EURUSD. Euro Aussie is positioned for corrective gains ,which means we may face a -60 pips drawdown (approx.) prior to China’s economic data. If the GDP turns into a non-event the possibility of incurring a -60 pips kick rises dramatically. However, we are under the impression this is a false signal (long EURAUD). any corrective gains are expected to be limited.

We will wait for the daily close for EURAUD, we may enter gold prior to the close.

XAU/USD Trade Alert

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XAU/USD 4hr Chart II 18/10/16

XAU/USD 4hr Chart II 18/10/16

XAU/USD long at market price (1,262.41)
Take profit: 1279.00
Protective stop: 1253.90
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 3 days

EURAUD Trade Alert

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EURAUD 4hr Chart II 18/10/16

EURAUD 4hr Chart II 18/10/16

EURAUD short at market price (1.4313)
Take profit: 1.4060
Protective stop: 1.4396
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 3 days

19/10/16 UPDATE: Gold is trading at 1268.98 at the time of this writing.

Please click on the chart to enlarge:

XAU/USD 4hr Chart 19/10/16

XAU/USD 4hr Chart 19/10/16

We are closing 40% of the long trade at market price and shift the protective stop to the entry.

19/10/16 UPDATE II: EURAUD is trading at 1.4233 at the time of this writing, we are closing 50% of the short trade at market price and shift the protective stop to the entry.

19/10/16 UPDATE III: XAU/USD is trading at 1,271.87 at the time of this writing, we are closing 10% of the long trade at market price and shift the protective stop to 1,266.00

19/10/16 UPDATE IV: EURAUD weakness was not triggered by China GDP. This was a tough decision but we decided not to wait for the daily close and close the short trade at market price (1.4188).

Please click on the chart to enlarge:

EURAUD Daily Chart II 19/10/16

EURAUD Daily Chart II 19/10/16

The reason for closing the trade are concerns for a spike in EUR pairs and crosses, which again may or may not materialize.

20/10/16 UPDATE: XAU/USD triggered the protective stop at 1,266.00, ending the trade with a profit.

20/10/16 UPDATE II: As we anticipated, EUR pairs and crosses spiked higher in today’s session due to the ECB monetary policy meeting, triggering numerous stops in the Forex market. We have noted a 4hr entry in USDJPY as a result, we are uncertain if the weakness may be due to a weak US Dollar or a strong Japanese yen. Our preliminary analysis points to a weak USD, however cannot rule out a strong yen.

USDJPY Trade Alert

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USDJPY 4hr Chart 20/10/16

USDJPY 4hr Chart 20/10/16

USDJPY short at market price (103.92)
Take profit: 102.75
Protective stop: 104.45
Risk Ratio (RR): 1 : 2.4 (approx.)
Estimated duration: 4 days

21/10/16 UPDATE: USDJPY is trading at 103.60 at the time of this writing, we are closing 30% of the short trade at market price and shift the protective stop to the entry.

Please click on the chart to enlarge:

USDJPY 4hr Chart 21/10/16

USDJPY 4hr Chart 21/10/16

USDJPY did re-test 104.15 before reversing lower.

21/10/16 UPDATe II: USDJPY reversed higher, triggering the protective stop that was shifted to the entry. We have ended the trade with a minor profit.

China GDP Trading Strategy: FX and Commodities

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China GDP Trading Strategy: FX and Commodities

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China GDP Trading Strategy: FX and Commodities

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China GDP Trading Strategy: FX and Commodities