The Weekly Update: EURUSD and AUDUSD Trading Strategies

EURUSD Technical Update

In the past week we were monitoring the Australian Dollar (AUD) and the Euro against a basket of currencies in the Foreign Exchange (Forex) market. We did anticipate corrective gains in EURUSD, which may have allowed to initiate a short trade as discussed in our prior weekly update, however, EURUSD corrective gains have exceeded our expectations.

Initiating a short trade in Euro Dollar at current levels means anticipating around +100 pips drawdown, which is fairly high as it is one of the majors. We are fairly convinced we are in front of EUR weakness but what is disturbing us are mixed signals regarding USD.

We are noting potential USD weakness, however, it may not be the case in USDJPY. It is possible we may witness weak JPY along with a weak USD, however, we would have preferred noting weak USD signals across all its pairs and crosses.

It may affirm our prior outlook for a weak Euro against a basket of currencies, which could suggest EURUSD may be the least attractive currency pair ahead of the FOMC monetary policy. We have mentioned in our recent updates the German coalition talks may be the trigger for EUR weakness.

At the time of this writing the coalition talks continue, no announcements were made as the Sunday’s deadline expired. One of the obstacles is the German immigration policy. We should stress that there can be other scenarios for EUR weakness.

From a technical angle, the only EUR currency pair / cross that may provide an entry is EURUSD. In other EUR crosses such as EURNZD we will have to take some risks.

AUD Signal Strategies

We have 2 potential entries in the Foreign Exchange (Forex) market, AUDUSD and AUDJPY. Before we present the technical strategies for AUD we should highlight that the entries may not correlate when the Fed publishes its monetary policy.

AUDUSD Weekly Chart

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The Weekly Update: EURUSD and AUDUSD Trading Strategies

AUDUSD Weekly Chart 19/11/17

AUDJPY Weekly Chart

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The Weekly Update: EURUSD and AUDUSD Trading Strategies

AUDJPY Weekly Chart 19/11/17

AUDUSD is a monthly entry but we presented the weekly chart. As we updated last Friday we noted several technical indications for a firm AUD. The distance from the nearest to the latter support is the potential drawdown, which is in either entry.

AUDUSD is a monthly entry, we are not keen on holding a couple of monthly entries simultaneously due to the potential drawdown. Our preference is opting for AUDJPY as we are also noting potential gains in USDJPY.

AUDJPY Trade Alert

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The Weekly Update: EURUSD and AUDUSD Trading Strategies

AUDJPY Weekly Chart II 19/11/17

AUDJPY long at market price (ask 84.77)
Take profit: 89.50
Protective stop: 82.70
Risk Ratio (RR): 1 : 2.1 (approx.)
Estimated duration: 30 days (approx.)

Price range: Relevant as long as the price is below 85.35

Note: The potential drawdown is a re-test of 83.40 but 84.40 may also hold. It will take time as it is a weekly entry.

21/11/17 UPDATE:  Although is not required by the book we are downsizing our exposure to AUD.

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The Weekly Update: EURUSD and AUDUSD Trading Strategies

AUDJPY Weekly Chart 21/11/17

AUDJPY is trading at 85.21 at the time of this writing, we are closing 10% of the long trade at market price.

We lack a sufficient distance from the market to shift the protective stops to the entry.

NZDCHF Trade Alert

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The Weekly Update: EURUSD and AUDUSD Trading Strategies

NZDCHF Daily Chart 22/11/17

For the benefit of new traders that joined us in the past several hours, we had a potential long entry in NZDUSD which we decided not capitalize on and wait for today’s session.

As NZDUSD corrective gains already began we focused on NZDCHF, which also had a long entry on the daily chart. The cross was not meant to retrace lower by the book as on some occasions it tends to dent the technical entry.

There are potential entries in NZDUSD, EURNZD, NZDCHF and NZDJPY. Initiating a long trade in NZDCHF means we are heavily relying on the upcoming Retail Sales figures from New Zealand (due prior to the daily close).

There are risks to initiating a long trade in NZDCHF which we are willing to take. Should the Retail Sales fail to trigger gains in NZD the entry is still technically supported.

This is a daily entry but we decided to layer a weekly stop for the long trade.

NZDCHF long at market price (ask 0.6751)
Take profit: 0.7070
Protective stop: 0.6620
Risk Ratio (RR): 1 : 2.4 (approx.)
Estimated duration: 21 days (approx.)

Note: In an event we mistimed the entry the potential drawdown is a re-test of 0.6640.

28/11/17 UPDATE: We are reducing our exposure in AUDJPY as a precaution. AUDJPY is trading at 84.60 at the time of this writing, we are closing 10% of the long trade at market price.

28/11/17 UPDATE II: We are waiting for more details on the missile launch (North Korea). We were planning to wait for the daily close but in light of the missile test that was conducted by North Korea we are cutting our exposure to CHF.

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NZDCHF Forex Signal 28/11/17

NZDCHF Daily Chart 28/11/17

NZDCHF is trading at 0.6796 at the time of this writing, we are closing 30% of the long trade at market price and shift the protective stop to the entry.

In an event we are too close to the market prior to the daily close we may temporarily shift the protective stop due to the spreading widening.

29/11/17 UPDATE: NZDCHF triggered the protective stop, we are not re-entering the market.

03/12/17 UPDATE: AUDJPY is trading at 85.56 at the time of this writing.

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AUDJPY Trading Signal 03/12/17

AUDJPY Weekly Chart 03/12/17

We are closing 10% of the long trade at market price and shift the protective stop to 84.65.

 

05/12/17 UPDATE II: Although AUDJPY is a weekly entry the daily close was not as high as we would have liked it to be. The daily close opened the possibility of a minor retracement.

Exiting or remaining in the trade depends on our willingness to absorb retracements, which is very similar to our prior trade in GBPUSD although in that incident the potential retracement was over 150 pips, which we refused to absorb. In AUDJPY the potential retracement is approximately 60 pips which may or may not materialize but it must be anticipated.

As there is a monthly entry in AUDUSD this was a tough decision to make but we decided to close AUDJPY at market price (85.62). We may re-enter AUD but at the time of this writing this may be in 2018.


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


The Weekly Update: EURUSD and AUDUSD Trading Strategies

The Weekly Update: EURUSD and AUDUSD Trading Strategies