EURNZD Signal Strategy: 4hr Setup

The US employment figures are continuing to improve, which may lead to an additional rate hike by the Fed. As the US Dollar (USD) benefits from safe-have flows reports of a brewing trade deal between the United States and China weakened USD against a basket of currencies.

We should highlight that the reports of a trade deal between the US and China was later denied. Some speculations suggested if a trade deal is not made in November the US may up its sanctions on China.

The expectations are for a trade deal some time in November. Reports that the UK was able to seal a deal with the EU regarding its financial services benefited GBP, which rose against a basket of currencies. We held 2 long positions in GBP last week, GBPAUD and JPY. As opposed to GBPJPY that posted moderate gains, GBPAUD was unable to trade higher.

The US midterm elections is one of the more attractive events this week. Should the Democrats gain control over the House it will be more difficult for President Trump to pass new laws. In addition, investigations into President Trump may be launched.

At the time of this writing there is no technical evidence we are in front of a significant market reaction. As we near 6 November we may have clearer projections. What may occur is a snap reaction to the outcome of the elections.

The Reserve Bank of New Zealand (RBNZ) and the Fed are scheduled to hold their monetary policies this week. The RBNZ already affirmed no rate hikes will take place for some time, the current expectations are for the Fed to hike rates in December.

The US sanctions on Iran were reimposed today, 8 countries received a temporary exemption and may continue exporting crude oil from Iran. We do not have an entry in crude oil at the time of this writing, we are continuing to monitor the commodity.

The Forex market has been fairly quiet in today’s session. We have noted 2 potential entries in EURGBP and EURNZD.

EURGBP 4hr Chart

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EURNZD Signal Strategy: 4hr Setup

EURGBP 4hr Chart 05/11/18

EURNZD 4hr Chart

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EURNZD Signal Strategy: 4hr Setup

EURNZD 4hr Chart 05/11/18

Both EURGBP and EURNZD display positive divergence in the Relative Strength Index (RSI). We are also noting the potential for a weak NZD and possibly GBP. Due to the brexit negotiations our preference is to opt for EURNZD.

The trade may be unrelated to the US congressional elections as New Zealand’s employment data are due tomorrow. The possible initial reaction to the employment figures may range anywhere between 80 – 150 pips in EURNZD. It is important to note that the inflation figures for New Zealand will be released several hours after the employment data.

As this is a 4hr entry we must see some corrective gains prior to the employment figures. We are still debating whether to opt for USD but at the time of this writing we would like to re-assess USD during the European session on Tuesday.

EURNZD Trade Alert

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EURNZD Signal Strategy: 4hr Setup

EURNZD 4hr Chart II 05/11/18

EURNZD long at market price (ask 1.7116)
Take profit: 1.7360
Protective stop: 1.7000
Risk Ratio (RR): 1: 2.1 (approx.)
Estimated duration: 4 days

Relevant as long as EURNZD is below 1.7155

Note: This is a 4hr entry. The potential drawdown is a re-test of 1.7066. We are opting for the trade prior to the daily close despite the negative swap that will be incurred.

The outcome of the trade may be determined by New Zealand’s employment and inflation figures that are due tomorrow.

EURUSD Trade Alert

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EURNZD Signal Strategy: 4hr Setup

EURUSD Monthly Chart 07/11/18

As some selling already took place in today’s session there is a greater risk for some corrective gains. From a monthly angle as this is a monthly entry the potential drawdown is minimal.

If we wait for corrective gains and they do not materialize we will miss the entry as it will widen the size of the protective stop.

EURUSD short at market price (bid 1.1430)
Take profit: 1.1005
Protective stop: 1.1632
Risk Ratio (RR): 1: 2.0 (approx.)
Estimated duration: 30 days

Relevant as long as EURUSD is above 1.1370

Note: This is a monthly entry. The potential drawdown is a re-test of 1.1525. It can take more than 30 days to materialize, we will have to see how volatile the currency pair is throughout November.

As this is a monthly entry some drawdown may be seen.

13/11/18 SIGNAL UPDATE: We are noting the potential for some corrective gains following the recent EURUSD selling. In monthly entries we are meant to absorb retracements, what we may attempt to do is to re-enter at a higher price.

The risk of doing so is that should EURUSD continue trading lower we may be unable to re-enter. EURUSD is trading at 1.1258 (ask) at the time of this writing, we are closing the short trade at market price.

CADJPY Trade Alert

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EURNZD Signal Strategy: 4hr Setup

CADJPY Daily Chart 13/11/18

CADJPY long at market price (ask 85.98)
Take profit: 88.80
Protective stop: 85.07
Risk Ratio (RR): 1: 3.0 (approx.)
Estimated duration: 20 days

Relevant as long as CADJPY is below 86.20

Note: This is a daily entry. The price still re-test 85.65 before correcting higher. This is an early entry but we cannot fully determine whether the re-test will indeed materialize.

The potential drawdown is a dip towards 85.35. We are expecting a weak JPY in tandem with firm CAD.

GBPCAD Trade Alert

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EURNZD Signal Strategy: 4hr Setup

GBPCAD Weekly Chart 13/11/18

GBPCAD short at market price (bid 1.7143)
Take profit: 1.6620
Protective stop: 1.7380
Risk Ratio (RR): 1: 2.3 (approx.)
Estimated duration: 30 days

Relevant as long as GBPCAD is above 1.7090

Note: This is a weekly entry. The potential drawdown is a re-test of 1.7280. We are not pleased with the recent corrective weakness in GBPCAD but are still opting for the trade.

Do note greater volatility may be seen across GBP pairs and crosses.