Euro Dollar and the Brexit: Predicting the FX Trend

The Brexit Impact on EURUSD

Many traders are currently on hold  (as we were) following the United Kingdom’s decision to leave the EU. The past week has been relatively calm, short covering was well-noted in multiple markets. Cameron’s decision to allow the new PM to invoke Article 50 (A50) has postponed the volatility we have been anticipating this week despite the EU pressure on Cameron to commence the negotiations.

We did email on our intention to short CHF following the monthly close but due to the recent selling we cannot enter CHF without the usage of a large stop only due to the fact the technical entry may have been missed. The monthly close may provide other entries in CHF pairs and crosses although we must admit it may seem unlikely at the time of this writing. We are therefore shifting our focus to Euro Dollar.

EURUSD Daily Chart

Please click on the chart to enlarge:

EURUSD Daily Chart 29/06/16

EURUSD Daily Chart 29/06/16

EURUSD Trading Strategy

Although the entry may also be seen on the weekly chart we are opting for the daily chart. Recent EURUSD gains appear to be corrective following the weekly breakout. We are aware the breakout was as a result of a gap but due to the length of the lower shadow of the previous session the odds for a resumption of the downtrend are relatively high. Under normal market conditions we would layer the stop above 1.1135. As we are concerned the volatility we have experienced several weeks may re-appear we are layering the protective stop above 1.1195 as a precaution. In the long-term, which is not relevant at the moment for EURUSD the European Cent Bank (ECB) may be forced to slash rates even further.

We are uncertain why may trigger the anticipated weakness in EURUSD, we assume it may be related to the European data that is due on Thursday’s session or Mark Carney’s speech. Risk aversion is likely to resurface, which is why we are also monitoring other currencies in the Foreign Exchange (Forex) market.

EURUSD trade alert will be issued around the daily close unless a significant price movement takes place in the market.

EURUSD Trade Alert Details

Please click on the chart to enlarge:

EURUSD Daily Chart II 29/06/16

EURUSD Daily Chart II 29/06/16

EURUSD short at market price (1.1119)
Take profit: 1.0820
Protective stop: 1.1224
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 7 days

30/06/16 UPDATE: EURUSD was shoved lower following reports the ECB is considering to loosen its QE rules.

Please click on the chart to enlarge:

EURUSD Daily Chart 30/06/16

EURUSD Daily Chart 30/06/16

EURUSD is trading at 1.1034 at the time of this writing, we are closing 30% of the short trade at market price.

30/06/16 UPDATE II: EURUSD recovery was somewhat expected as we stated in the prior update. As this is a daily entry we must take action and lower the stop. We are shifting the protective stop to 1.1129. We will be close to the market but the stop must be reduced. If the stop is triggered the trade will still end with a profit due to the partial realization.

01/07/16 UPDATE: EURUSD triggered the protective stop loss order, ending the trade with a minor profit due to the partial’s realization.

Euro Dollar and the Brexit: Predicting the FX Trend

As EURUSD short trade is closed this page can now be accessed by all traders. Open trades and relevant intraday strategies are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
Euro Dollar and the Brexit: Predicting the FX Trend

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Euro Dollar and the Brexit: Predicting the FX Trend

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Euro Dollar and the Brexit: Predicting the FX Trend