The Weekly Update: BOE Monetary Policy Trading Strategy

US GDP and Government Shutdown

The US Gross Domestic Product (GDP) came in at 4.1%, marking one of the fastest recoveries in recent years. The market reaction was fairly limited as there were high expectations for the GDP figures to significantly exceed the market’s expectations.

It has been reported the UK army will to distribute food and medicines to weak communities in an event of a no-deal with the EU. It has also been suggested large supermarkets are preparing for a hard brexit. The next key meeting with EU leaders on brexit is scheduled to take place on 20 September, 2018.

President Trump threatened today  a government shutdown when the date is due (September) if Congress fails to approve the funds for boarder wall between and Mexico and later the current immigration laws. We are not seeing an immediate effect on the market, during Monday’s session more clarity may be provided.

Although no rate hike is expected, the Fed monetary policy is among the key events in the Forex market this week.

CADCHF Technical Strategy

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The Weekly Update: BOE Monetary Policy Trading Strategy

CADCHF Daily Chart 29/07/18

One of the crosses we have been monitoring is CADCHF. We have attempted to long CADCHF via a buy limit order, which was unsuccessful as the market failed to trigger the entry price. The price has tested the neckline of the reversed Head-And-Shoulders (H&S).

We were waiting for a daily close above the neckline (0.7640), which did not take place. A daily close above the neckline may affirm further gains in the cross. We will continue monitoring CADCHF in an event of a firm breakout.

EURGBP Technical Signal

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The Weekly Update: BOE Monetary Policy Trading Strategy

EURGBP Daily Chart 29/07/18

EURGBP has been held in a range since October 2017. As opposed to prior months we are noting an attempt to break outside the range. When compared to the potential entry in CADCHF it is not what we like to classify as a conservative entry.

The Bank of England (BOE) monetary policy is one of the key events this week. The market has already dismissed the possibility of a rate hike. In light of the recent developments in the brexit negotiations the BOE is expected to remain on hold.

We cannot determine whether EURGBP potential gains may be related to the BOE monetary policy or the Consumer Price Index (CPI) figures from the euro zone. There is a risk for EURGBP to re-test 0.8870 and possibly 0.8840 before it is expected to correct higher.

It is challenging to determine whether some drawdown will be incurred. There are entries where we expect imminent strength/ weakness based on the technical strategy that is used. In EURGBP there is room for some weakness as the price has already corrected higher but a bearish retracement is not guaranteed to materialize.

The protective stop is likely to be layered beneath 0.8840, which is the weekly support.

EURGBP Trade Alert

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The Weekly Update: BOE Monetary Policy Trading Strategy

EURGBP Daily Chart II 29/07/18

EURGBP long at market price (ask 0.8893)
Take profit: 0.9070
Protective stop: 0.8820
Risk Ratio (RR): 1: 2.3 (approx.)
Estimated duration: 18 days

Relevant as long as EURGBP is below 0.8913

Note: There are 2 key support levels, 0.8870 and 0.8840. We cannot determine at the time of this writing which support level will hold in an event of corrective weakness, the potential drawdown is a re-test of 0.8840.

Very similar to our recent trades it is not a conservative entry. We remind that the pip’s value in EURGBP is greater than other currency pairs and crosses.

30/07/18 UPDATE: We are shifting EURGBP protective stop to 0.8868.

GBPUSD Trade Alert

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The Weekly Update: BOE Monetary Policy Trading Strategy

GBPUSD 4hr Chart 30/07/18

GBPUSD short at market price (bid 1.3129)
Take profit: 1.3005
Protective stop: 1.3210
Risk Ratio (RR): 1: 1.6 (approx.)
Estimated duration: 4 days

Relevant as long as GBPUSD is above 1.3115

Note: We will begin by writing that this is a very poor risk ratio but if timed correctly the weakness may begin within the next 24 hours. If we do incur some drawdown we expect the weakness to take place on Wednesday due to the UK manufacturing data.

The potential drawdown is a re-test of 1.3180. This is a 4hr entry.

31/07/18 UPDATE: EURGBP failed to cling onto its gains in today’s session. The corrective weakness may act a warning signal. We decided to remain in the trade despite the alert and reduce our exposure to GBP.

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The Weekly Update: BOE Monetary Policy Trading Strategy

EURGBP Daily Chart 31/07/18

EURGBP is trading at 0.8908 at the time of this writing, we are closing 20% of the long trade at market price. GBPUSD is trading at 1.3129 (at the entry) at the time of this writing, we are closing 20% of the short trade at market price.

The partial closures are our response to the warning signals. We will issue an update on EURGBP protective stop (which will be tightened) and on the market after the daily close.

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

Last Updated on October 8, 2018