The Weekly Update: Another FX Intervention is Coming?

Digital Derivatives MarketsResearch, Weekly Market Analysis

Volatility, Greece, Again

Recent volatility in EUR pairs and crosses lead to substantial losses and profits in the Forex market. The Fed was able to counter the moderate USD buying in the market by refusing to confirm the rates will be hiked as expected in June 2015. We have expressed this concern in our EURJPY trade alert before the FOMC statement, which is why we believe our traders were not negatively exposed to the market volatility that resulted in significant losses amongst retail traders.

Weekend news from Greece signal to us more volatility is expected this week in the Forex market. Greece must submit their detailed reforms by Wednesday and the EU will make its decision whether to accept these reforms will be made on Friday. The uncertainty is likely to contribute the expected volatility along with market speculations that will intensify as we near Wednesday. The Bank of Greece joined Alexis Tsipras’s creativity by opening a Solidarity account for public debt repayment, seeking funds from the public to repay that nation’s debt:

Pursuant to Bank of Greece Governor’s Act 271/4.3.2010, an account entitled “SOLIDARITY ACCOUNT FOR REPAYMENT OF PUBLIC DEBT” (No. 24/26132462) has been opened at the Bank’s Head Office, Public Entities Accounts Section, for voluntary deposits, to be used exclusively for the repayment of Greece’s public debt.

Deposits to the account shall be accepted, starting 5 March 2010, at the Head Office, the Branches, Outlets and Agencies of the Bank of Greece, as well as through commercial banks.

The details of the solidarity account are as follows:
IBAN: GR 04 010 0024 0000000026132462

For further information, please contact the Public Entities Accounts Section, tel: 210 320 2716 & 210 320 3376.

Source: Bank of Greece

The State Bank of Pakistan joins the global trend of slashing rates and announced the interest rate is lowered from 8.50% to 8.00%, due to low oil prices. A potential crisis that was yet to have been priced-in by the market is an escalation in the NATO defensive shield plan in Europe. Threats from Russia were made to Denmark that if it will join the defensive shield plan the Danish warships will be a target by Russia’s nuclear missiles. Further escalation will eventually impact global markets. We are researching the possible scenarios to determine if a trade may be executed in the market via our fundamental strategies.

EURNZD Technical Analysis

Our focus for this week will be on the New Zealand Dollar (NZD), nicknamed as ‘Kiwi.’

The Reserve Bank of New Zealand (RBNZ) affirmed in its previous monetary policy meeting it will not use monetary policy to manipulate the FX rates but highlighted the rates may be hiked or slashed based on the economic figures. The RBNZ conducted a direct FX intervention in 2014 in order to weaken NZD against a basket of currencies. One of the reasons the central bank hiked rates in 2014 is to prevent a housing bubble in the country that are often fuelled by low rates.  NZD benefited from moderate gains in the FX markets against the Euro following the European Central Bank (ECB) monetary policy and recent developments in Greece. The heavy selling in EURNZD may prompt the central to intervene in the Foreign Exchange market once again to defend the country’s exports sector, which is vital to New Zealand’s economy.

We are uncertain this will be the fundamental trigger for the moderate correction we are expecting for EURNZD but we have nevertheless received a confirmation from the weekly chart based on our technical models.

EURNZD Weekly Chart

Please click on the chart to enlarge:

EURNZD Trading Strategy, 23 March, 2015

EURNZD Weekly Chart, 23/03/15

Following the bearish breakout in January 2015 moderate losses were seen in Euro-Kiwi.  The Relative Strength Index (RSI) positive divergence in the weekly chart indicates a bottom may have been made and corrective gains are due within the next 30 days. At the time of this writing the expected gains appear to be merely corrective before a resumption of the downtrend. We will be able to conclude the nature of the reversal in due date, possibly at the end of April 2015. Our target has been determined by the natural 50.0% retracement at 1.4945 while our entry is at market price. We are aware the markets are closed at the time of this writing.

Our entry will greatly depend on the opening of EURNZD at 21:00 GMT, which we will be updated at the bottom of this page and an email notification along with the protective stop loss order. EURNZD may open higher as Standard & Poor’s (S&P) credit rating agency revised Portugal’s outlook to positive. We are aware Fitch revised Finland outlook from stable to negative, however, we believe S&P decision will counter.

We would like to highlight we also have a technical entry to short NZDCHF but we are refraining from over-exposing ourselves to NZD ahead of the economic data from China that is due later this week.

The Canadian Dollar

The Canadian Dollar (CAD) or the ‘loonie’ is likely to mislead many technical traders. It appears the Canadian Dollar may weaken against a basket of currencies not against the US Dollar (USDCAD). A possible scenario is that the US Dollar will be weaker than CAD but the alternative is a false technical signal. We will examine CAD pairs and crosses such this week in order to concrete the entries we have received from our technical models. If this will be a false signal many technical traders are likely to incur losses over their CAD positions.

Key Technical Levels For This Week

The technical levels are based on the 4hr chart using multiple indicators and raw price action.

EURUSD  1.0696  1.0907
 GBPUSD  1.4893  1.5027
 USDJPY  120.66 119.71
 AUDUSD  0.7732   0.7806
EURJPY 129.00 130.76
USDCAD  1.2530  1.2711
USDCHF 0.9593 0.9874
GBPJPY 179.16 180.21
EURGBP  0.7216  0.7306
GOLD  1,175.00  1,197.80

23/03/15 UPDATE: We are executing a long trade in EURNZD at market price (1.4304), protective stop loss order layered at 1.4110, targeting 1.4945.

24/03/15 UPDATE: EURNZD is trading at 1.4357 at the time of this writing. We are closing 10% of the long trade at market price to compensate for the negative rollover.

25/03/15 UPDATE: EURNZD is trading at 1.4431 at the time of this writing, assuring the long trade is in approximately +120 pips.

EURNZD 4hr Minutes Chart

Please click on the chart to enlarge:

EURNZD 4hr Chart, 25/03/15

EURNZD 4hr Chart, 25/03/15

We are closing 10% of the long trade at market price. We are not shifting the protective stop to the entry as we have insufficient distance from the market.

01/04/15 UPDATE: EURNZD is finally trading over 1.4500, which allows us to shift the protective top to the entry and close 35% of the long trade at market price.

EURNZD Hourly Chart, 1 April 2015

Please click on the chart to enlarge:

EURNZD 60 Minutes Chart, 01/04/15

EURNZD 60 Minutes Chart, 01/04/15

We will continue to monitor EURNZD price and post updates when found relevant. We highlight the entry was made on the weekly chart. The trade alert can now be accessed by all traders. If you wish to have instant access to our future trade alerts and market news please apply for our trade alerts packages at the homepage.

01/04/15 UPDATE II: In light of recent weakness in EURNZD that drove the price to 1.4422 at the time of this writing we have decided to close 15% of the short trade at market price.

Last Updated on June 18, 2021