The Weekly Update: CAD BOC Technical Signal

Market Summary

GBP gained most of its momentum towards the end of last week as it was reported several countries in the euro zone favour a soft brexit approach. We were unable to capitalize over GBPJPY in our weekly update but GBPUSD is nearing its first hurdle around 1.3960.

We were planning to initiate a long trade in GBPAUD but due to the gains that took place on Friday we are no longer able to initiate a long trade in the cross. We will keep tracking GBPAUD in an event we will be able to enter this week. To recap, the Bank of Japan (BOJ) decision to cut its monthly purchases without a prior notice sent the Japanese yen higher against a basket of currencies.

CAD BOC Strategy

This week the Bank of Canada (BOC) is expected to announce its monetary policy where a rate hike is expected. Last week we noted the potential for CAD weakness but waited for a firmer confirmation. As the Canadian Dollar weakened without providing a firmer entry we remained on hold.

Following the weekly close we are noting some indications that CAD weakness has ended. We have a choice between CADJPY and EURCAD.

CADJPY Daily Chart

Please click on the chart to enlarge:

The Weekly Update: CAD BOC Technical Signal

CADJPY Daily Chart 14/01/18

EURCAD Daily Chart

Please click on the chart to enlarge:

The Weekly Update: CAD BOC Technical Signal

EURCAD Daily Chart 14/01/18

Signal Strategy

We are likely to opt for EURCAD unless a significant price movement takes place shortly after the opening of the markets. The potential weakness is approximately +400 pips, however, we are likely to opt for a more conservative target.

By crossing EURCAD with other CAD pairs and crosses we assume CAD strength may be short-lived rather than a trend reversal. Our preliminary analysis points to 5 – 10 days but it greatly depends on the market’s reaction to the BOC monetary policy.

Any news surrounding NAFTA (the 7th round of negotiations is expected to commence in February, 2018) may also trigger some volatility in CAD pairs and crosses.

EURCAD Trade Alert

Please click on the chart to enlarge:

The Weekly Update: CAD BOC Technical Signal

EURCAD Daily Chart II 14/01/18

EURCAD short at market price (bid 1.5210)
Take profit: 1.4920
Protective stop: 1.5347
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 10 days (approx.)

Price range: Relevant as long as the price is above 1.5150

Note: The potential drawdown is a re-test of 1.5280.

17/01/18 UPDATE: EURCAD is trading at 1.5155 at the time of this writing.

Please click on the chart to enlarge:

The Weekly Update: CAD BOC Technical Signal

EURCAD Daily Chart 17/01/18

We are closing 20% of the long trade at market price.

USDCHF Entry Order

Please click on the chart to enlarge:

The Weekly Update: CAD BOC Technical Signal

USDCHF Daily Chart 17/01/18

We already spotted a potential entry yesterday in USDCHF but the price was still too high. We were expecting the price to continue falling towards 0.9558. which failed to materialize.

We are layering an entry order in USDCHF (buy limit), in an event USDCHF retraces lower in tomorrow’s session but fails to trigger the entry order we may initiate the trade at market price during the European / US session.

USCHF long at 0.9580 (entry order)
Take profit: 0.9748
Protective stop: 0.9508
Risk Ratio (RR): 1 : 2.3 (approx.)
Estimated duration once triggered: 8 days (approx.)

USDCHF Entry Order

We decided to cancel the entry order and initiate the trade at market price.

Please click on the chart to enlarge:

The Weekly Update: CAD BOC Technical Signal

USDCHF Daily Chart 18/01/18

USCHF long at market price (ask 0.9619)
Take profit: 0.9830
Protective stop: 0.9519
Risk Ratio (RR): 1 : 2.1 (approx.)
Estimated duration once triggered: 12 days (approx.)

Relevant as long as the price is below 0.9635

Note: The potential drawdown is a re-test of 0.9558.

19/01/18 UPDATE: We are shifting USDCHF protective stop to 0.9508 prior to the weekly close.

25/01/18 UPDATE: Mnuchin remarks that a weak US Dollar is good for trade triggered significant USD selling in the market, triggering USDCHF protective stop. The ECB press conference spiked EUR pairs and crosser higher, triggering the protective stop in EURCAD.

We already had indications EURUSD may trade higher on Wednesday, we considered the possibility of closing EURCAD and initiating a short trade in AUDCAD, however, it is a fairly aggressive maneuver and decided to refrain from it.


AS THE OBJECTIVE OF THE STRATEGIES HAS BEEN MET THE ANALYSIS IS NOW ACCESSIBLE TO ALL TRADERS


The Weekly Update: CAD BOC Technical Signal

The Weekly Update: CAD BOC Technical Signal