The Weekly Update: EURUSD Outlook and AUDUSD Strategy

EURUSD Outlook

In the past week we have witnessed a resumption of EURUSD uptrend in the Forex market. Mario Draghi affirmed the market conditions are improving, which was interpreted by the market as a step closer to tapering the QE. The current expectations are for the ECB to begin tightening its monetary policy in December, 2017.

We have intentionally avoided issuing signals in any of USD pairs and crosses. One of the immediate questions we were asked is why did we choose to avoid initiating long trades in EURUSD.

When we assess the risk in the market we pay greater attention to the required stop and potential drawdown than the expected return. Should we begin opting for excessive risks the outcome may be one of the two scenarios, a fairly high return or a substantial loss. Recovering from such a loss if incurred may be excruciating.

As we already elaborated on in our prior updates we missed the entry in EURUSD and other currency pairs that materialized over a week ago. Once we acknowledge an entry was missed we do not attempt to force a trade in the market but reserve the ability to do so via shorter time frames.

We chose not to do so in EURUSD as the potential profit did not match the risk of initiating the long trade despite the outcome. In light of the current market conditions we discussed in the prior weekly update are uncertain whether EURUSD uptrend has ended.

USDCHF Daily Chart

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The Weekly Update: EURUSD Outlook and AUDUSD Strategy

USDCHF Daily Chart 23/07/17

We often use USDCHF as a reverse correlation to EURUSD although we must highlight the correlation is not 100%. Despite the positive divergence (which is also seen in USDJPY 4hr chart) the price broke below the support line. We cannot determine if this is a false breakout but it may suggest further weakness may be seen.

We are not shorting USDCHF as we will not hold any long CHF positions in the market regardless of the outcome of the entry. What we have noted however is that AUD may be positioned for corrective weakness.

AUDUSD Daily Chart

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The Weekly Update: EURUSD Outlook and AUDUSD Strategy

AUDUSD Daily Chart 23/07/17

AUDUSD Strategy

This is a fairly classic short entry in AUDUSD. There may be some corrective gains on Monday but it appears the Australian CPI or RBA Lowe speech may trigger the weakness. We should highlight it appears to be temporary weakness as a successful re-test of 0.7742 (approx.) may provide a long entry where the corrective gains may be more substantial than the corrective weakness.

Initiating a short trade in AUDUSD may mean having an increased currency exposure to the Australian Dollar, which we must bear in mind. Unless AUDUSD will gap higher at the opening we have until Monday’s close to consider a short trade.

A small note on NZD, should NZDUSD post a monthly close at current levels it may invalidate our bearish forecast for the pair. We uncertain NZDUSD will hold at these levels but we will wait for a monthly confirmation. We are monitoring JPY pairs and crosses.

We will issue an update on hoe we wish to proceed with our signals after the market opens.

Note: We did not enter after the opening of the market as we required a bullish gap in AUDUSD.

AUDUSD Trade Alert

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The Weekly Update: EURUSD Outlook and AUDUSD Strategy

AUDUSD Daily Chart 24/07/17

AUDUSD short at market price (0.7954)
Take profit: 0.7750
Protective stop: 0.8047
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 4 days (approx.)

Price range: Relevant as long as price is above 0.7920.

Note: The potential drawdown is a brief show above 0.7985.

24/07/17 UPDATE: AUDUSD is trading at 0.7923 at the time of this writing, we are closing 30% of the short trade at market price.

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The Weekly Update: EURUSD Outlook and AUDUSD Strategy

AUDUSD Daily Chart II 24/07/17

The reason for the partial closure is due to the closing price. The price is currently too low, which may suggest a re-test of 0.7985 or a break below today’s lows in tomorrow’s session prior to the CPI (stop was later shifted to 0.7960).

25/07/17 UPDATE: AUDUSD triggered the protective stop at 0.7960, we are not re-entering the market. A stop hunt is or has took place in EURUSD, which triggered moderate USD selling that was reflected in AUDUSD.

EURAUD Trade Alert

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The Weekly Update: EURUSD Outlook and AUDUSD Strategy

EURAUD 4hr Chart 25/07/17

EURAUD long at market price (1.4661)
Take profit: 1.4875
Protective stop: 1.4560
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 24 hours (approx.)

Price range: Relevant as long as price is above 1.4685

Note: The potential drawdown is a re-test of 1.4625, which is approximately +35 pips. This is not a trade we would like to roll into the FOMC statement.

26/07/17 UPDATE:  EURAUD gains were capped by the neckline.

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The Weekly Update: EURUSD Outlook and AUDUSD Strategy

EURAUD 4hr Chart 26/07/17

Although there may be some support at current levels we are closing 30% of the long trade at market price (1.4707) and shift the protective stop to the entry despite the minimal distance from the market.

26/07/17 UPDATE II: EURAUD triggered the protective stop at the entry. It appears a spike triggered the stop but we are not re-entering the market. The rejection off the neckline was an indication some weakness may take place, the minor support we noted gave way.

GBPNZD Trade Alert

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The Weekly Update: EURUSD Outlook and AUDUSD Strategy

GBPNZD 4hr Chart 27/07/17

GBPNZD long at market price (1.7457)
Take profit: 1.7970
Protective stop: 1.7215
Risk Ratio (RR): 1 : 2.1 (approx.)
Estimated duration: 10 days (approx.)

Price range: Relevant as long as price is below 1.7390.

Note: The potential drawdown is a re-test of 1.7360. We were looking for a re-test of 1.7360 but we are uncertain it will materialize, which is why we are initiating the long trade at current levels.

GBPCAD Trade Alert

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The Weekly Update: EURUSD Outlook and AUDUSD Strategy

GBPCAD 60min Chart 27/07/17

GBPCAD long at market price (1.6392)
Take profit: 1.6600
Protective stop: 1.6320
Risk Ratio (RR): 1 : 2.5 (approx.)
Estimated duration: 7 days (approx.)

Price range: Relevant as long as price is below 1.6430

27/07/17 UPDATE: GBPCAD is trading around the entry at the time of this writing. We have noted the corrective gains following the dip, nevertheless we are downsizing the position for 20% at market price (1.6392). We may adjust the protective stop after the daily close ( stop was later shifted to 1.6328).

GBPNZD is trading at 1.7440 at the time of this writing, we are closing 20% of the long trade at market price. The progress of the trade has been sluggish, as it has been derived from the 4hr chart we are downsizing our exposure near the entry at market price.

28/07/17 UPDATE: GBPNZD is trading at 1.7519 at the time of this writing, we are closing 20% of the long trade at market price and shift the protective stop to 1.7460.

28/07/17 UPDATE II: We are shifting GBPCAD protective stop to 1.6350 and close 10% of the long trade at market price (1.6424).

28/07/17 UPDATE III: Canada GDP triggered CAD strength in the market. GBPCAD did not withstand the pressure and triggered the protective stop.

28/07/17 UPDATE IV: GBPNZD is trading at 1.7475 at the time of this writing, we are closing the long trade at market price. We required a higher price in order to reduce the possibility of another leg lower before a resumption of the uptrend, which did not materialize.

We are aware GBPNZD has corrected higher but we have managed to realize profits over our other GBP long positions.


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



The Weekly Update: EURUSD Outlook and AUDUSD Strategy

The Weekly Update: EURUSD Outlook and AUDUSD Strategy