The Weekly Update: China-US Tension Part II

China-US Tariffs

China imposed tariffs on US goods in retaliation to President Trump’s actions against imported steel and aluminum. The news sparked heavy selling in the Dow and SP500, which in turn triggered safe-haven flows into the Japanese yen.

Similar to our prior trades in JPY crosses there are no technical signals that the tension will indeed continue at the time of this writing. Increasing our exposure to the Japanese yen is fairly challenging as some risks will have to be taken.

Before presenting our strategies for the Japanese yen we have been fairly conservative in our entries in our recent trades in the market. As no significant events took place for some time many currency pairs and crosses are held in a range. These are optimal market conditions for scalping.

We have avoided excessive risks in the past several months and remained on hold when required. As we are not compensated via trading volume we will remain hold if found to be the best approach. The alternative will be significant losses that may be beyond recovery.

The natural cross in similar scenarios is often AUDJPY. As we are already exposed to AUD (even though we cut our exposure to the cross) we would rather avoid AUD for the time being. GBPJPY offers the cleanest entry but the potential drawdown is fairly high.

GBPJPY Signal Strategy 2 April 2018

Please click on the chart to enlarge:

The Weekly Update: China-US Tension Part II

GBPJPY Daily Chart 02/04/18

To recap, we were waiting for a firm break above 150.20 to re-enter GBPJPY. While the price did close above 150.20 it was insufficient to provide an entry. As the recent dip was triggered by the US-China tension it may provide a long entry in the cross.

The potential drawdown is a re-test of 147.25, which we would rather not see as 148.45 may be sufficient to sustain the price. The price must post a daily close above 150.45 in order to trade higher. The objective of such a breakout is 155.90, however, it may take more than 30 days to acquire the technical target.

The Risk Ratio (RR) could have been better but it is one of the better entries we have in the market at the time of this writing. We are likely to opt for GBPJPY prior to the daily close unless a significant price movement takes place. We are aware that we will also be sensitive to UK economic data.

GBPJPY Trade Alert

Please click on the chart to enlarge:

The Weekly Update: China-US Tension Part II

GBPJPY Daily Chart II 02/04/18

GBPJPY long at market price (ask 148.75)
Take profit: 152.85
Protective stop: 146.55
Risk Ratio (RR): 1 : 1.8 (approx.)
Estimated duration: 21 days (approx.)

Relevant as long as GBPJPY is below 149.35

Note: The potential drawdown as noted in the strategy is a re-test of 147.25. The risk ratio is fairly poor but it is one of the cleaner entries that we have in the market. It is a risk we are willing to opt for. As we are aware what triggered safe-haven flows into JPY we are opting for the trade.

03/04/18 UPDATE: GBPJPY is trading at 149.92 at the time of this writing, we are closing 20% of the long trade at market price and shift the protective stop to 147.90.

04/04/18 UPDATE: GBPJPY is trading near 150.45 at the time of this writing. The possible scenarios are either a firm break above 150.45 or a fairly moderate correction to the recent gains.It is challenging to determine the likelihood of either scenario.

We may have the ability to re-enter GBPJPY but it may take several days. Our approach is fairly conservative to accommodate the current market conditions. We have stated in the strategy that we will exit should the price test the resistance levels that were highlighted on the chart.

Please click on the chart to enlarge:

GBPJPY Forex Signal 4 April 2018

GBPJPY Daily Chart 04/04/18

GBPJPY is trading at 150.38 at the time of this writing, we are closing the long trade at market price.


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


The Weekly Update: China-US Tension Part II

The Weekly Update: China-US Tension Part II