GBPAUD Signal Strategy September 2018

USD Safe-Haven Flows

The US Dollar (USD) benefited from safe-haven flows towards the end of last week. As discussed in our prior strategies, EURUSD was positioned for corrective weakness based on the weekly chart. The selling took place too early (Thursday, prior to the weekly close).

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Attempting to short EURUSD at current levels means a relatively high risk of incurring around +125 pips drawdown for the next 14 days. As a result should EURUSD does not correct higher we may be unable to initiate a trade in the currency pair.

EURUSD Weekly Chart Last Week

Please click on the chart to enlarge:

EURUSD Weekly Chart 2 September 2018

Please click on the chart to enlarge:

Should EURUSD correct higher we may have to wait until we near the end of the week.

Reports on Bloomberg that President Trump may instruct new tariffs on China as soon as next week. The US President rejected a trade deal with the European Union (EU) on automobiles and threatened to pull out the World Trade Organization (WTO), which contributed to USD gains in the Forex market.

There were expectations for an agreement between the US and Canada on NAFTA. As we expected, a deal was not struck between the countries. The negotiations are expected to re-continue on Wednesday. One of the issues that prevented a deal on Friday is around the Canadian dairy supply management.

GBPAUD Signal Strategy

Please click on the chart to enlarge:

GBPAUD is the only potential entry we have noted following the weekly close. GBPAUD posted a daily close above its resistance (1.7938), which may pave the way for further gains.

The price will need re-test the breached resistance, preferably within the next 24 hours. In an event it takes several days we will require to re-assess the entry. Initiating the trade at current levels means adding +70 pips (approx,) to the protective stop, which we are reluctant to do.

Should the price continue correcting higher without a re-test we may dismiss the entry as the potential drawdown will increase significantly.

We should add that GBP weakness is seen it may also provide us with an entry in GBPCAD, which we exited from last week. We did note some weak entries but GBPAUD is currently the firmest entry but we must see a some retracement, which may cement the entry.

USDCHF Trade Alert

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USDCHF long at market price (ask 0.9696)
Take profit: 0.9795
Protective stop: 0.9647
Risk Ratio (RR): 1: 2.0 (approx.)
Estimated duration: 4 days

Relevant as long as USDCHF is below 0.9710

Note: This is a 4hr entry. The potential drawdown is 0.9658, however, should the price post a 4hr close below 0.9680 it may trigger the protective stop. We are providing more room for the trade in an event of a short-lived spike.

We must highlight that there are risks associated with the entry. We are mainly opting for the trade due to the size of the protective stop and the potential for imminent gains.

04/09/18 SIGNAL UPDATE: USDCHF is trading at 0.9726 at the time of this writing, we are closing 30% of the long trade at market price and shift the protective stop to the entry.

Please click on the chart to enlarge:

Due to the breakout there may be some retracement, which is why we are closing 30% of the long trade at market price. Should further gains take place in today’s session the trade may end today.

04/09/18 SIGNAL UPDATE II: We are shifting USDCHF protective stop to 0.9719.

04/09/18 SIGNAL UPDATE III: USDCHF gains are much stronger than we have anticipated (less than 24 hours). It is still too early to determine whether the USD strength we have been discussing for the past couple of weeks has began, we require more time.

Please click on the chart to enlarge:

(the prior screenshot was deleted by error, which is why 0.9752 is displayed on the chart)

This is a fairly decent profit bearing mind it is a 4hr entry. Such strong gains are often followed by corrective weakness. As a result we decided to close USDCHF long trade at market price (0.9762). We may have the ability to re-enter USDCHF but it greatly depends on the market.

EURNZD Entry Order

Reports that Germany and the UK dropped key brexit demands raised hopes for a smooth exit from EU, which sent GBP higher against a basket of currencies. Our ability to re-enter GBPCAD has ended as a result. The BOC affirmed it is monitoring the NAFTA negotiations while affirming additional rate hikes may be required.

We are noting some indications for corrective gains in NZD. The strength appears to be temporary at the time of this writing but the potential profit may be sufficient. We had a choice between NZDCHF and EURNZD. We decided to layer a sell limit order in EURNZD based on the daily chart.

Please click on the chart to enlarge:

EURNZD short at 1.7738 (sell limit order)
Take profit: 1.7445
Protective stop: 1.7885
Risk Ratio (RR): 1: 2.0 (approx.)
Estimated duration: 10 days

Note: In an event EURNZD corrects higher in tomorrow’s session but does not trigger the entry we may cancel the order and initiate the trade at market price. The potential drawdown is a spike towards 1.7840. We have approximately 24 hours to opt for EURNZD.

06/09/18 SIGNAL UPDATE: We cancelled EURNZD sell limit order as the price failed to trigger the sell limit order.

All of the above signal updates were initially sent via email.

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Last Updated on June 12, 2021