The Weekly Update: Aiming for the Central Banks Policies

Three central banks will be releasing their monetary policies, the Bank of Japan (BOJ), the Fed and the Reserve Bank of New Zealand (RBNZ). All the monetary policies will be announced in less than a 24-hour period.  The Fed monetary policy is likely to affect a wide range of instruments that will not be limited to the Foreign Exchange (Forex) market.

We will begin with the first technical entry we have obtained from the markets following the weekly close. We have been closely monitoring GBP pairs and crosses throughout the past week, Our attempt to capitalize over GBPUSD resulted in minimal profit as the currency was heavily sold on Friday following Philip Hammond’s remarks that the UK may be forced out the single market if it desires to implement immigration restrictions as a result of the brexit. GBP move lower did not affect the technical entry as we are not making use of intraday time frames.

EURGBP Weekly Chart

You may click on the chart to enlarge:

EURGBP Weekly Chart 18/09/16

EURGBP Weekly Chart 18/09/16

The second reversed Head-And-Shoulders (H&S) that was painted following the brexit (that we were able to capitalize on in our brexit strategy) may have obtained its target at 0.8724. A new top H&S is being painted at the time of this writing. As opposed to the customary H&S we find little need to wait for a break below the neckline. What we must bear in mind is a possible re-test of 0.8615. We also bearing in mind weak stops that are placed above 0.8615 may be hunted, which is why the protective stop will be placed above 0.8645.

We are uncertain any of the monetary policies we mentioned earlier will be the trigger for EURGBP bearish reversal. One of the possibilities is the Fed signalling it may hike rates by the end of the year, which may result in strong EURUSD selling that will eventually spill over to EURGBP. Our assumption however is that reports over a deal with the EU in regards to access to the single market is the most likely trigger for EURGBP. A gap higher at the opening of the Forex market will enhance the risk ratio of the short trade.

The BOJ Strategy

The Japanese government introduced its fiscal policy last month, which lead to a strong Japanese yen (JPY) in the Forex market. Official BOJ members provided mixed signals to the upcoming monetary policy of the central bank. What gained the most attention is the possibility of foreign bonds purchasing, which will ultimately weaken the yen in the market. Certain BOJ members dismissed the notion of such program, which left traders with mixed views on what the BOJ may or may not do in its monetary policy.

CADJPY Monthly Chart

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CADJPY Monthly Chart 18/09/16

CADJPY Monthly Chart 18/09/16

We were initially under the impression the BOJ is unlikely to surprise in September. However, CADJPY monthly chart suggests the cross is due to reverse higher. The top H&S objective may have also been obtained, similar to EURGBP. It is extremely difficult whether the BOJ will indeed be the trigger or OPEC’s informal meeting at the end of the month. According to recent reports. Iran may have agreed to cut production, which may in turn spike crude oil higher and reflect in CAD pairs and crosses. Monthly entries often means holding onto the trade for some time as opposed to a weekly or daily entry. In an effort to determine whether we may witness a weak JPY or a strong CAD we focus on other JPY pairs and crosses.

GBPJPY Monthly Chart

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GBPJPY Monthly Chart 18/09/16

GBPJPY Monthly Chart 18/09/16

Similar to CADJPY, GBPJPY may also be positioned for a strong bullish reversal. The difference between GBPJPY and CADJPY is the potential drawdown, which exceeds +300 pips in GBPJPY. Although such a potential drawdown is reasonable in GBPJPY (do note it is a monthly entry) it may not be the best entry. Our assumption is that the BOJ may trigger further JPY appreciation which would then be reversed by the Fed. We must stress GBJPY triggers are rather difficult to determine aside our earlier note on EURGBP.

EURJPY may provide a long entry in the daily chart. However, we suspect we will witness a whipsaw reaction in EURJPY. The risk appears to be much greater in EURJPY, which is the we are not listing the chart. USDJPY and AUDJPY have little to offer, NZDJPY weakness stemmed from the weekly chart as discussed in the prior analysis.

We are leaning towards EURGBP and CADJPY and possibly an entry order (buy limit) in GBPJPY. We will determine how to proceed once the market opens.

The Fed Strategy

This is probably the most anticipated monetary policy. The Fed have been providing mixed signals to the market since the last hike took place at the beginning of 2016. To recap, Italy is due to hold a referendum on amending the Italian constitution. If Italy rejects the changes the Italian PM stated he will resign, which as opposed to the UK may lead to general elections and the uprising of the five star movement. In addition, once the UK invokes Article 50 (expectations are for January 2017), if the brexit negotiations turn sour it may force central banks in an effort to restore confidence to the market. Fed members are well-aware of these events and the possible reactions. However, as the inflation rose as seen in the CPI the central bank may be forced to act by the end of the year regardless of the US Presidential elections. We are expecting the Fed to confirm

Aside GBPUSD which we suspect is irrelevant to the Fed’s decision we do not have a concrete entry in USD pairs and crosses. We may dismiss the charts and use fundamental analysis that is presented here to enter the market but it certainly will not be today. Technical entries may emerge on the daily charts as we near the Fed’s monetary policy.

RBNZ Strategy

The RBNZ affirmed in its recent monetary policy meetings further rate cuts are expected but not a rapid pace. We are uncertain the recent GDP figures are sufficient for a rate cut to take place in the upcoming meeting. We presented our outlook for NZD in our prior market research. Our long EURNZD triggered the protective stop loss order due to a spike, which means the entry is still valid, however, we are not entering the market with excessively large stops that could be beyond recovery. EURNZD monthly chart demands a +550 pips stop (approx.).

We are also bearing in in mind the RBNZ monetary policy, which is the last meeting to take place could reverse NZD prior reaction to the Fed. Similar to the Fed, we will have to wait until we near the RBNZ meeting.

We are currently leaning towards EURGBP and CADJPY but we will wait for the opening of the Forex market to determine how to proceed.

EURGBP Trade Alert

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EURGBP Weekly Chart II 18/09/16

EURGBP Weekly Chart II 18/09/16

EURGBP short at market price (0.8573)
Take profit: 0.8270
Protective stop: 0.8678
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 21 days

Note: 0.8615 may be re-tested as it is the nearest resistance. Such re-tests are not guaranteed to take place. Please note it is a weekly entry (due to a technical error EURGBP chart was not saved, which is why the chart displays a different price than our entry).

CADJPY Trade Alert

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CADJPY Monthly Chart II 18/09/16

CADJPY Monthly Chart II 18/09/16

CADJPY long at market price (77.25)
Take profit: 81.65
Protective stop: 74.97
Risk Ratio (RR): 1 : 2.3 (approx.)
Estimated duration: 21 days

Note: This is a monthly entry, it is the tightest stop can implement. The reason why the estimated duration is only 21 days is due to the BOJ and OPEC. This trade is subject to the most volatility.

GBPAUD Trade Alert

As we near the Fed’s monetary policy we suspect a hawkish statement will be released, possibly suggesting a rate hike by the end of the year. We have multiple entries in the market, our main concern is the whipsaw reaction. As opposed to GBPJPY this is a whipsaw we will have to absorb if it indeed takes place as we cannot determine its extent.

Please click on the chart to enlarge:

GBPAUD 4hr Chart 21/09/16

GBPAUD 4hr Chart 21/09/16

GBPAUD long at market price (1.7109)
Take profit: 1.7450
Protective stop: 1.6948
Risk Ratio (RR): 1 : 2.3 (approx.)
Estimated duration: 48 hours

Note: The entry is supported via the daily and weekly chart in a scenario the Fed monetary policy impact on the market will be lighter than anticipated. Should that be the case we would expecting to hold the trade for longer than 48 hours.

25/09/16 UPDATE: We have decided to re-enter GBP via GBPCHF as the monthly, bullish reversal for GBP remains intact in the Forex market.

GBPCHF Trade Alert

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GBPCHF Monthly Chart 26/09/16

GBPCHF Monthly Chart 26/09/16

GBPCHF long at market price (1.2570)
Take profit: 1.3820
Protective stop: 1.2294
Risk Ratio (RR): 1 : 4 (approx.)
Estimated duration: 35 days

Note: This is a monthly entry.

27/09/16 UPDATE: Large funds began selling GBP on Thursday evening. The reports made their way through the market as more accounts joined the selling. GBPAUD and EURGBP triggered the protective stop loss orders, ending the trades with a loss.

GBPJPY Trade Alert

GBPJPY recent selling following Deutsche bank concerns provided us with an intraday entry, which is inline with the monthly chart.

Please click on the chart to enlarge:

GBPJPY 4hr Chart 29/09/16

GBPJPY 4hr Chart 29/09/16

GBPNZD Trade Alert

We are opting for an intraday stop. Our exposure to GBP will be extremely high but we are confident in the monthly chart. Intraday stop has risks as it is a monthly entry but we have decided to opt for the long trade. We are aware the Manufacturing PMI is due on Monday.

Please click on the chart to enlarge:

GBPNZD 4hr Chart 02/10/16

GBPNZD 4hr Chart 02/10/16

GBPNZD long at market price (1.7754)
Take profit: 1.8135
Protective stop: 1.7618
Risk Ratio (RR): 1 : 2.7 (approx.)
Estimated duration: 21 days

03/10/16 UPDATE: On rare occasions we are widening stops and this is one of those times. We are shifting GBPJPY protective stop from 129.95 to 129.80. We are unlikely to shift the stop again.

GBPJPY is trading at 130.20 at the time of this writing.

05/10/16 UPDATE: CADJPY is trading at 78.53 at the time of this writing. We are closing 20% of the long trade at market price and shift the protective stop to the entry.

Please click on the chart to enlarge:

CADJPY Monthly Chart 05/10/16

CADJPY Monthly Chart 05/10/16

GBPJPY is trading at 131.92 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:

GBPJPY 4hr Chart 05/10/16

GBPJPY 4hr Chart 05/10/16

09/10/16 UPDATE: Due to various reports on the UK’s future access to the single market following the brexit extraordinary slippage was noted noted in all GBP pairs and crosses. Heavy stops were triggered on the leg lower, which fueled the selling. The stops in GBPCHF, GBPNZD and GBPJPY were triggered.

CADCHF Trade Alert

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CADCHF Daily Chart 09/10/16

CADCHF Daily Chart 09/10/16

CADCHF long at market price (0.7368)
Take profit: 0.7565
Protective stop: 0.7303
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 14 days

10/10/16 UPDATE: CADCHF is trading at 0.7454 at the time of this writing.

Please click on the chart to enlarge:

CADCHF Daily Chart 10/10/16

CADCHF Daily Chart 10/10/16

We are closing 30% of the long trade at market price and shift the protective stop to the entry.

CADJPY is trading at 78.63 at the time of this writing.

CADJPY Monthly Chart 10/10/16

CADJPY Monthly Chart 10/10/16

We are closing 20% of the long trade at market price, stop remains at the entry.

12/10/16 UPDATE: CADCHF is trading at 0.7463 at the time of this writing, we are shifting the protective stop to 0.7400.

EURJPY Trade Alert

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EURJPY Daily Chart 12/10/16

EURJPY Daily Chart 12/10/16

EURJPY long at market price (114.69)
Take profit: 117.85
Protective stop: 113.60
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 14 days

14/10/16 UPDATE: CADCHF is trading at 0.7529 at the time of this writing.

Please click on the chart to enlarge:

CADCHF Daily Chart 14/10/16

CADCHF Daily Chart 14/10/16

we are closing the long trade at market price.

CADJPY is trading at 79.24 at the time of this writing, we are closing 20% of the long trade at market price and shift the protective stop to 78.05.

18/10/16 UPDATE: CADJPY is trading at 79.15 at the time of this writing. We are shifting the protective stop to 78.49.

21/10/16 UPDATE: CADJPY triggered the protective stop that was shifted above the entry, ending the trade with a decent profit.

The Weekly Update: Aiming for the Central Banks Policies

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The Weekly Update: Aiming for the Central Banks Policies

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The Weekly Update: Aiming for the Central Banks Policies

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The Weekly Update: Aiming for the Central Banks Policies