The Weekly Update: Brexit Negotiations Strategy and EURCAD

Theresa May Disappointment

Theresa May carried her much-anticipated brexit on Friday, failing to provide any new details on the brexit negotiations that are set to continue this week. As the market noticed no new details are being provided GBP was sold against a basket of currencies.

A day before the speech a cabinet meeting was called in the UK to discuss its context. We suspect the speech was altered as speculations suggested the UK Foreign Secretary will resign following the speech although it was officially denied, which may explain the fairly puzzling goal of the speech.

North Korea is likely to continue affecting global markets this week along with the brexit negotiations. The dominating events this week are speeches carried by Mario Draghi (testimony), Haruhiko Kuroda, Janet Yellen and Mark Carney.

All the above speeches may have a significant impact on the FX markets. The German elections failed to have a significant impact on EURUSD, which is expected to open with a minor bearish gap at the time of this writing.

EURCAD Signal Strategy

EURCAD rebounded off its weekly support, which may suggest further gains are in store. The required protective stop is approximately +400 pips at current levels with a potentially +200 pips drawdown. When we note similar entries as EURCAD in the Forex market we also conduct our analysis on the daily chart.

EURCAD 4hr Chart

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The Weekly Update: Brexit Negotiations Strategy and EURCAD

EURCAD Weekly Chart 24/09/17

We may be able to initiate a long trade should EURCAD retrace lower. The optimal entry for the signal may be anywhere between 1.4615 and the weekly support (in black). We did consider the usage of a buy limit order but this is a retracement we would like to first see and initiate the trade at market price is found relevant.

We will not be absorbing a +400 pips stop in EURCAD. Should the cross retrace higher we will shift our attention to other potential entries in the market. Aside Mario Draghi’s testimony Canada Gross Domestic Product (GDP, due on Friday) is the key figure for the Canadian Dollar (CAD).

We are expecting CAD to be among the more attractive currencies to trade in the market within the next 10 days.

GBPUSD Signal Strategy

We are expecting GBP to continue dominating the FX markets throughout 2018. As we have repeatedly mentioned in all our past GBP long positions we will not long GBP at any costs. Certain entries require substantial stops (exceeding +400 pips) which we are avoiding. We are only opting for entries that require tolerable stops with a healthy Risk Ratio.

GBPUSD 4hr Chart

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The Weekly Update: Brexit Negotiations Strategy and EURCAD

GBPUSD 4hr Chart 24/09/17

A bullish flag is being painted on GBPUSD 4hr chart at the time of this writing. As a significant gap is not expected in GBPUSD following Germany’s elections it is a fairly attractive entry as the potential drawdown appears to be minimal.

The 100% objective of the potential bullish flag is seen at 1.3850. While theoretical speaking GBPUSD can acquire the target this week we anticipate it may take some time. We will lower the target we would rather refrain from withstanding corrective weaknesses during the expected gains.

A break above the upper resistance (in black) may act as a confirmation further gains are due to materialize. We will wait for the opening of the Forex market to determine how we wish to proceed with GBPUSD potential signal.

GBPUSD Trade Alert

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The Weekly Update: Brexit Negotiations Strategy and EURCAD

GBPUSD 4hr Chart II 24/09/17

GBPUSD long at market price (ask 1.3491)
Take profit: 1.3794
Protective stop: 1.3353
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 10 days(approx.)

Price range: relevant as long as GBPUSD remains below 1.3520

Note: The potential drawdown is a re-test of 1.3405. The risk for a similar stop hunt that we have seen minutes prior to the weekly close is fairly high but are still opting for GBP.

We have the minimal distance that is required to withstand a stop hunt in GBPUSD. In an event a stop hunt takes place as we have seen on Friday we reserve the ability to re-enter should we find it appropriate.

27/09/17 UPDATE: GBPUSD has traded lower in today’s session, mainly due to USD strength. The earlier bearish spike we witnessed in GBP pairs and crosses was a stop hunt, which we were expecting to take place but the recent USD strength is fairly moderate.

1.3360 is a weekly support level, which is why the protective stop was layered several pips below. We are not evolving the long position into a weekly entry, the stop remains at 1.3353.

We are not in a good position as the weekly support may be re-tested and our distance is minimal at the time of this writing. We are preparing for the possibility the protective stop may be triggered.

27/09/17 UPDATE II: As we updated earlier we are not in a good position in GBPUSD. The US tax reforms plan may continue to sustain the US Dollar unless any negative news regarding the plan break out.

From a technical angle the support level we used gave way, GBPUSD could be in front of 150 pips lower, which is why we are not shifting the protective stop. Only if GBPUSD posts a 4hr close above 1.3430 it may invalidate the breakout and trigger further gains towards 1.3600 as stops may be triggered on the rally.

There are several key events tomorrow but the most important one is BOE Carney’s speech. We have already accepted the possibility the stop may triggered. The only reason we are not closing the long trade as it could still be a false breakout. GBPUSD is trading at 1.3388 at the time of this writing.

28/09/17 UPDATE: GBPUSD triggered the protective stop, we are not re-entering the trade. Stops were targeted in the spike lower before correcting higher. We do not re-enter trades that were stopped out unless certain conditions are met, we will re-assess GBP pairs and crosses at the weekly close, which is also the monthly close.

EURCAD Trade Alert

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The Weekly Update: Brexit Negotiations Strategy and EURCAD

EURCAD Daily Chart 26/09/17

EURCAD long at market price (ask 1.4559)
Take profit: 1.4950
Protective stop: 1.4385
Risk Ratio (RR): 1 : 2.3 (approx.)
Estimated duration: 14 days(approx.)

Price range: relevant as long as EURCAD remains below 1.4600

Note: The potential drawdown is a re-test of 1.4445. Similar to GBPUSD we have the minimal distance to withstand a bearish spike should it materialize within the next 24 hours.

27/09/17 UPDATE: Based on the technical entry we cannot shift EURCAD protective stop to the entry. We can still witness corrective weakness to the recent gains but by the book is meant to be absorbed.

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The Weekly Update: Brexit Negotiations Strategy and EURCAD

EURCAD Weekly Chart 27/09/17

An alternative to shifting the stop is a partial realization, which is why we are closing 20% of EURCAD long trade at market price (1.4644).

29/09/17 UPDATE: Canada GDP triggered CAD weakness, however, it is fairly limited at the time of this writing. After re-assessing EUR pairs and crosses there is a minor possibility for EUR weakness (not today).

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The Weekly Update: Brexit Negotiations Strategy and EURCAD

EURCAD Weekly Chart 29/09/17

We would have liked to see a larger spike to Canada GDP. Although it may still materialize later on in today’s session we decided to close EURCAD long trade at market price (1.4727) due to the disappointing reaction to the GDP.


AS ALL THE SIGNALS IN THIS PAGE ARE CLOSED THE STRATEGIES ARE NOW ACCESSIBLE TO ALL TRADERS


The Weekly Update: Brexit Negotiations Strategy and EURCAD

The Weekly Update: Brexit Negotiations Strategy and EURCAD