Italy 2019 Budget Deficit and EURJPY Signal

Italy and EURJPY

The Euro was knocked lower in Friday’s session as the proposed Italian budget weighted on the currency. Italy is proposing a -2.4% GDP deficit for 2019, 2020 and 2021, which has raised some concerns. The EU is displeased with the Italian government’s approach, which weighed on global markets.

It is interesting to note that no safe-haven flows were seen in the Forex market (CHF and JPY in particularity). It may suggest it is viewed by the market as an isolated event rather than a potential for a financial crisis.

The UK Conservative party’s annual conference is due this week, which may grab some attention in light of the brexit negotiations. Another crucial meeting is due in October but we should highlight that market is prepared for an emergency meeting in mid November.

The Canadian Dollar (CAD) benefited from Bank of Canada (BOC) Poloz remarks, which raised the probability of a rate hike in October.

EURJPY 4hr Chart

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Italy 2019 Budget Deficit and EURJPY Signal

EURJPY 4hr Chart 30/09/18

The entry is based off the daily chart in our prior EURJPY signal. We noted the risk for mild corrective gains in the currency pair, which is why we exited the trade last week.

EURJPY is expected to gap higher at the time of this writing (over 132.00), which may provide a short entry in the currency pair. t is fairly difficult to determine whether we will re-enter EURJPY until the opening of the market at 22:00 GMT.

AUDCHF initially opened lower but at current levels (over 0.7070 at the time of this writing) we will be unable to re-enter the cross unless it gaps lower by 22:00 GMT.

GBPCHF posted a daily close above the neckline. As it re-tested the neckline the corrective gains that took place prior to the weekly close mean we can no longer opt for the trade.

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Italy 2019 Budget Deficit and EURJPY Signal

GBPCHF Daily Chart 30/09/18

As the neckline can still be re-tested it increases the potential drawdown and the size o the protective stop.

We are monitoring other crosses in the market but we require more time to determine whether we have the ability to enter the market. EURJPY appears to be the only entry we may have at the opening of the Foreign Exchange (Forex) market.

Although we have not discussed the following in our prior updates, as the next US sanctions on Iran (on crude oil) are scheduled to kick-in in November we have seen some gains in crude oil. As OPEC refused to increase production to stabilize oil’s prices further gains were added to the commodity.

We are paying close to attention to crude oil, we did forecast the gains at the beginning of 2018 but were unable to initiate the trade with a reasonable stop due as it was a monthly entry.

EURJPY Trade Alert

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Italy 2019 Budget Deficit and EURJPY Signal

EURJPY 4hr Chart II 30/09/18

EURJPY short at market price (bid 132.10)
Take profit: 130.20
Protective stop: 132.98
Risk Ratio (RR): 1: 2.2 (approx.)
Estimated duration: 7 days

Relevant as long as EURJPY is above 131.75

Note: This is a 4hr entry based off the daily chart. The potential drawdown is a re-test 132.55.

01/10/18 SIGNAL UPDATE: Based on the prior 4hr close there are some risks EURJPY may re-test 132.50 with the ability to break above. We waited until we neared the daily close to see whether the price can continue trading lower.

As it is not the case at the time of this writing we see no valid reason to remain in the trade. EURJPY is trading at 131.96 at the time of this writing, we are closing the short trade at market price.

EURNZD Trade Alert

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Italy 2019 Budget Deficit and EURJPY Signal

EURNZD Daily Chart 03/10/18

EURNZD short at market price (bid 1.7631)
Take profit: 1.7350
Protective stop: 1.7768 (shifted to 1.7796)
Risk Ratio (RR): 1: 2.2 (approx.)
Estimated duration: 21 days

Relevant as long as EURNZD is above 1.7580

Note: The potential drawdown is a re-test of 1.7680. We are still uncertain if this is an early entry, we are willing to absorb the potential drawdown should it materialize.

In an event EURNZD does re-test 1.7680 in tomorrow’s session, if we are too close to the market prior to the Non-Farm Payrolls (on Friday) we may temporarily widen the protective stop due to the spread widening.

04/10/18 SIGNAL UPDATE: Our entry in EURNZD was early as the price is re-testing 1.7730 at the time of this writing (which was highlighted on the chart).

We decided to provide more room for the trade, the protective stop may require further adjustments. We are shifting EURNZD protective stop to 1.7796.

05/10/18 SIGNAL UPDATE: We are temporarily shifting EURNZD protective stop to 1.7955 prior to the US Non-Farm Payrolls due to the spread widening that is often seen upon the release.

05/10/18 SIGNAL UPDATE II: EURNZD continued trading higher in tandem with GBPNZD. It is worth noting that GBPNZD gained over +650 pips in the past 72 hours due to brexit-related news.

As the spread widens on Sunday we are shifting EURNZD protective stop to 1.8030.

We will readjust the protective stop on Sunday after the opening of the market. We will not continuously widen the protective stop, we will incur the loss if required.

07/10/18 SIGNAL UPDATE: We are shifting EURNZD protective stop to 1.7955.

The only event we will widen EURNZD protective stop is due to spread widening or in an event the price misses the protective stop by several pips and we have some indication for further weakness.

To be fully transparent, EURNZD will need to post a daily close below 1.7795 to continue weakening. At the time of this writing there is a higher probability for further gains.

We layered the protective stop at 1.7955 as there is a minor possibility for a retracement. We have accepted the possibility EURNZD may end with a loss.

08/10/18 SIGNAL UPDATE: EURNZD is trading at 1.7813 (ask) at the time of this writing, we are closing 20% of the short trade at market price.

Despite EURNZD weakness it is currently insufficient to suggest further weakness is in store. The price may still correct higher beyond the daily high. We found current levels to be appropriate to cut our exposure to EURNZD.

11/10/18 SIGNAL UPDATE: EURNZD is trading at 1.7768 at the time of this writing, we are closing 10% of the short trade at market price.

16/10/18 SIGNAL UPDATE: EURNZD is trading at 1.7578 at the time of this writing, we are closing the short trade at market price.

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Italy 2019 Budget Deficit and EURJPY Signal

EURNZD Daily Chart 16/10/18

All of the above trade updates on this page were issued via email to our members.

Last Updated on November 4, 2018