The Weekly Update: Catalonia Tension Persists and CADJPY

Catalonia Versus Spain

We would first begin with Euro Dollar. Following EURUSD daily chart that we presented in the prior weekly update the currency pair continues to trade inside a fairly narrow range. As soon as the neckline is violated it may affirm further weakness in the pair. As long as it remains inside the range there is littler we can do.

EURUSD Daily Chart

Please click on the chart to enlarge:

The Weekly Update: Catalonia Tension Persists and CADJPY

EURUSD Daily Chart 22/10/17

Many algorithms have already picked up the range, stops are likely to be layered below 1.1695 and above 1.1880. As it is a +100 pips range (approx,) it is fairly unattractive to us.

The tension between Catalonia and Madrid has escalated over the weekend as article 155 has been invoked despite reports it will be delayed. Catalonia may continue to make headlines during the upcoming week but the impact on global markets (aside IBEX35) is still unclear.

When Catalonia suggested it is leaning towards independence several years ago EUR was heavily sold. One possibility as to why we are not witnessing a similar reaction is due to the ECB monetary policy. As the market is expecting the European Central Bank to begin tapering the current QE in December it may continue to sustain EURUSD until Thursday.

The ECB monetary policy and press conference is crucial as the current tension in Spain may delay the much-anticipated tapering. For the benefit of new traders that recently joined us, the ECB has been intentionally leaking information regarding its future monetary policy prior to key meetings.

Once the information hits the wire a sudden spike may be seen across EUR pairs and crosses. It is a phenomena we aware of for quite some time. Our assumption is that should the ECB decide to ‘leak’ such info it will be on either Tuesday or Wednesday.

Japanese Yen Update

The Japanese yen (JPY) is expected to weaken against a basket of currencies as exit polls signal Abe is due for a firm victory. In 2015 and 2016 we updated our members that Abe wishes to call for a referendum on changing Japan’s constitution.

Since Word War II Japan is forbidden for having an army, instead they currently have a defensive force. Abe wishes to change the constitution that will allow Japan to have an army. The referendum, if called may have a significant impact on the Japanese yen.

FX Signals Strategies

We are monitoring several currency pairs / crosses but at the time of this writing we lack a firm entry in the market aside CADJPY, which we mentioned last week.

CADJPY Weekly Chart

Please click on the chart to enlarge:

The Weekly Update: Catalonia Tension Persists and CADJPY

CADJPY Weekly Chart 22/10/17

We initially expected CADJPY weekly support (89.10) to give way, which failed to materialize. As the support is holding it may suggest further gains in the cross. Even if CADJPY will not gap higher at the opening of the FX markets (a gap higher is expected at the time of this writing) we can already see the potential drawdown of a long position.

Should the Bank of Canada (BOC) monetary policy that is due later this week have a negative impact on the Canadian Dollar we may have to decide whether to opt for the trade this week or wait for the weekly close. In an event we will have entry prior to the BOC monetary policy we will initiate the trade.

At the time of this writing the risk of drifting in a drawdown for 14 – 21 days is elevated should the trade will be initiated after the opening of the Foreign Exchange market.

We are also noting early indications that point to potential gains in the commodity currencies (AUD, NZD and CAD) but at the time of this writing they are insufficient to provide an entry.

AUDUSD Trade Alert

Please click on the chart to enlarge:

The Weekly Update: Catalonia Tension Persists and CADJPY

AUDUSD Daily Chart 23/10/17

AUDUSD long at market price (ask 0.7812)
Take profit: 0.7935
Protective stop: 0.7773
Risk Ratio (RR): 1 : 2.8 (approx.)
Estimated duration: 7 days (approx.)

Price range: Relevant as long as the price is below 0.7835

Note: The potential target in EURAUD is significantly higher than AUDUSD but we lack a firm entry in EURAUD at the time of this writing. Australia CPI may be the trigger for AUD corrective gains.

The potential drawdown is a re-test of 0.7795. This is a daily entry.

23/10/17 UPDATE:  This is a fairly rare adjustment, we are shifting AUDUSD protective stop to 0.7764. There are several support levels to layer the protective stop beneath, we decided to provide more room for the trade in an event of a short-lived spike. AUDUSD is trading at 0.7806 at the time of this writing.

24/10/17 UPDATE: We are shifting AUDUSD protective stop to 0.7755. The CPI may determine the outcome of the trade. The protective stop had to be re-adjusted as we are too close to the market and the spread may widen prior to the CPI.

AUDUSD triggered the protective stop following the CPI figures, which missed the market expectations. It is extremely rate for us to re-enter trades that were stopped out.

GBPJPY Trade Alert

Please click on the chart to enlarge:

The Weekly Update: Catalonia Tension Persists and CADJPY

GBPJPY 4hr Chart 26/10/17

GBPJPY long at market price (ask 150.02)
Take profit: 153.45
Protective stop: 148.70
Risk Ratio (RR): 1 : 2.5 (approx.)
Estimated duration: 7 days (approx.)

Price range: Relevant as long as the price is below 150.35

Note: We are relying on the chart. This is a 4hr entry with a weekly target. The trade must be in some profit within the 24 hours. The potential drawdown is a re-test of 149.35.

Despite the recent minimal volatility please note GBPJPY is an extremely volatile cross.

27/10/17 UPDATE:  We are temporarily shifting GBPUSD protective stop to 1.3000. We are temporarily shifting GBPJPY protective stop to 148.00 The stops are shifted due to the spread widening (mainly in GBPJPY) and in an event minor gaps materialize on Sunday.

GBPJPY has evolved into a daily entry, establishing the trade on the 4hr chart was unsuccessful, which may suggest the long trade has been initiated too early.

Please click on the chart to enlarge:

The Weekly Update: Catalonia Tension Persists and CADJPY

GBPJPY Daily Chart 29/10/17

29/10/17 UPDATE: CADJPY weekly close may provide a long entry in the cross. As we may have several entries in the market as we discussed in the latest weekly update we must decide how we wish to control the market exposure.

Please click on the chart to enlarge:

The Weekly Update: Catalonia Tension Persists and CADJPY

CADJPY Weekly Chart 29/10/17

29/10/17 UPDATE II: We are shifting GBPJPY protective stop to 148.54. The entry as evolved into a daily entry as we updated earlier. The 4hr entry was unsuccessful and we chose to adjust to the daily entry.

31/10/17 UPDATE: GBPJPY is trading at 150.95 at the time of this writing, we are closing 20% of the long trade at market price.

01/11/17 UPDATE: GBPJPY is being capped by 151.25, which we marked on the chart. Aside GBPJPY, GBPUSD has also reached a daily resistance while EURGBP is on a daily support. As opposed to the prior BOE monetary policy there is no short signal from the market but we are not pleased 151.25 was tested.

Please click on the chart to enlarge:

GBPJPY Daily Analysis 1 November 2017

GBPJPY Daily Chart 01/11/17

This is a tough decision but we said we will act. We are closing GBPJPY long trade at market price (151.17)


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


The Weekly Update: Catalonia Tension Persists and CADJPY

The Weekly Update: Catalonia Tension Persists and CADJPY