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EURUSD Versus Greece Versus the PBOC
As we have updated our subscribers we are expecting a weak US Dollar (USD) in the Forex market. The People’s Bank of China (PBOC) actions to devalue the Yuan may impact the Fed rate hike decision in September. As a result we are expecting a weak USD in the medium-term against a basket of currencies. We are already holding a long trade in AUDUSD and looking to increase our short USD exposure in EURUSD. What may also support moderate gains in the Euro is the key vote in the Greek Parliament that is due overnight. If the Greek Parliament approves the package moderate gains may be seen on the Euro. Europe also drafted a plan in case Greece would require a loan to pay its debt to the European Central Bank (ECB) that is due on 20 August, 2015.
Finance Ministers teleconference meeting is due on Friday following the Greek Parliament Vote. Risk appetite may be seen if no surprises will be seen and the Greek bailout package will be endorsed.
We are not reassured by the PBOC remarks the Yuan will not be devalued again against the US Dollar. However, if the central bank does intervene for the fourth time EURUSD should be unscathed and EURCNY will propel higher and therefore limit any bearish impact on Euro Dollar. As this is a daily chart it may take approximately 10 days for the market to reach our target.
EURUSD Technical Analysis
We are using the daily chart to determine our entry in the Forex market.
EURUSD Daily Chart
Please click on the chart to enlarge:
EURUSD Daily Chart 13/08/15
The key level for our Euro Dollar strategy is 1.1113. The price was able to successfully close above 1.1113 and the current session is simply a re-test that affirms further gains may be seen. What has attracted our attention is the 55 Daily Moving Average (DMA) that concretes EURUSD support level. Looking at the broader picture, EURUSD is trading within a triangle (pennant) where a break above the resistance line (upper purple line) may fuel the gains in the market. Although the initial target for the long position is the upper resistance line of the triangle we are opting for a scenario where a firm breakout will be achieved, which sets the objective of the breakout to 1.1624.
The daily close above 1.1113 also suggests the double-bottom reversal pattern has been affirmed, which concretes our bullish views for the currency pair. The protective stop loss order is layered below the 55DMA, ensuring a decent Risk Ratio (RR) is maintained. Although by the book we should wait for the daily close but due to the upcoming Greek vote we are entering the market at current levels. By doing so we should be prepared for the possibility the price may retrace lower before reversing higher. Such a scenario is not guaranteed but must be acknowledged as we are entering a few hours ahead of time.
EURUSD Trade Alert Details
EURUSD long at market price (1.1136)
Take profit: 1.1624
Protective stop: 1.1009
Risk Ratio (RR): 1 : 3.5 (approx.)
Estimate duration: 10 days
20/08/15 UPDATE: We should highlight most of the updates were made via email. EURUSD is trading at 1.1208 at the time of this writing. While the price still didn’t break above the resistance that will yield further gains in the pair we are closing 20% of the long trade at market price.
20/08/15 UPDATE II: EURUSD is trading at 1.1236 at the time of this writing. A break above the resistance as discussed in the strategy we presented may pave the way for further gains.
Please click on the chart to enlarge:
EURUSD Daily Chart 20/08/15
We are closing 10% of the long trade at market price and shift the protective stop to the entry. We decided to wait for the weekly close in order to issue new trades.
21/08/15 UPDATE II: EURUSD is trading at 1.1337 at the time of this writing, paving the way for further gains towards our target.
Please click on the chart to enlarge:
EURUSD Daily Chart 21/08/15
Nevertheless as the trade is in a decent profit we are closing 20% of the long trade at market price, stop will be shifted before the market closes.
21/08/15 UPDATE II: EURUSD is trading at 1.1373 at the time of this writing.
Please click on the chart to enlarge:
EURUSD Daily Chart II 21/08/15
We are shifting the protective stop to 1.1204 and close 10% of the long trade at market price.
24/08/15 UPDATE: We rarely issue updates at this hour but in light of recent events we make an exception today. EURUSD is trading at 1.1434 at the time of this writing, we are closing 10% of the long trade at market price and shift the protective stop to 1.1305.
24/08/15 UPDATE II: EURUSD reached our take profit in an extraordinary rally.
Please click on the chart to enlarge:
EURUSD Daily Chart 24/08/15
It took the trade 11 days to reach our target, one day over our estimated duration. We have also made a decent profit over our long trade in GBPNZD.
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Last Updated on November 25, 2015