The Weekly Update: Focusing on China CPI

The upcoming French elections had an exaggerated impact on the Euro in the Forex market. The allegations against Fillon may evolve into a criminal investigation and the rise of La Pen in the polls weakened the Euro against a basket of currencies. As we have mentioned in our prior updates, due to Trump’s victory in the US elections we believe the market has overreacted to the news as there is plenty of time to the French elections. Based on the market reaction the ECB and the Fed are unlikely to take any action until the elections take place. The German elections will take place later this year (September).

AUDCHF Weekly Chart

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The Weekly Update: Focusing on China CPI

AUDCHF Weekly Chart 12/02/17

AUDCHF posted a weekly close above its resistance, which is also the neckline of a reversed H&S on the monthly chart. In breakout strategies it is difficult to assess whether the resistance will be re-tested before reversing higher. China CPI is likely to be the trigger for AUD pairs and crosses. We cannot use the monthly objective (0.8325) of the reversed H&S as it is not the monthly close. AUDCHF is not expected to post any significant gaps at the time of this writing. If we initiate a long trade we must acknowledge the possibility of the cross re-testing 0.7642. Such re-tests are not guaranteed to take place but must be anticipated should they occur.

NZDUSD Daily Chart

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The Weekly Update: Focusing on China CPI

NZDUSD Daily Chart 12/02/17

If you open AUDUSD daily chart you would see a similar entry that was affirmed last week. Our main concern with NZDUSD is that the gains may be limited to 30 pips (approx.). Once the price clears above 0.7235 the gains may continue above 0.7330. If 0.7235 is tested but holds and it may suggest NZDUSD is due for another leg lower. As noted above, China CPI may be the trigger in the commodity currencies (AUD and NZD).

In regards to GBP, we do not have a decisive entry in any of GBP pairs and crosses. We require a significant price movement in order to consider an entry in GBP. We are likely to capitalize over an intraday entry in GBP should we have an entry this week. As noted above, little action is expected from the Fed and the ECB until the French elections.

NZDUSD Trade Alert

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The Weekly Update: Focusing on China CPI

NZDUSD Daily Chart 12/02/17

NZDUSD long at market price (0.7202)
Take profit: 0.7320
Protective stop: 0.7160
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 7 days

AUDCHF Trade Alert

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The Weekly Update: Focusing on China CPI

AUDCHF Weekly Chart 12/02/17

AUDCHF long at market price (0.7689)
Take profit: 0.7930
Protective stop: 0.7605
Risk Ratio (RR): 1 : 6 (approx.)
Estimated duration: 21 days

Note: As outlined in the strategy we cannot determine whether 0.7642 (former resistance) will be re-tested. The retracement (if occurs) may stall around 0.7670, which is why we are not keen on using a buy limit order and opt for the trade at market price.

12/02/17 UPDATE: AUDCHF is trading at 0.7749 at the time of this writing, we are closing 10% of the long trade at market price.

13/02/17 UPDATE: NZDUSD triggered the protective stop, it is too early to determine whether the support gave way as there is time until the daily close but we are out of the trade.

CADJPY Trade Alert

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The Weekly Update: Focusing on China CPI

CADJPY Daily Chart 14/02/17

CADJPY short at market price (87.34)
Take profit: 85.30
Protective stop: 88.10
Risk Ratio (RR): 1 : 2.5 (approx.)
Estimated duration: 7 days

16/02/17 UPDATE: CADJPY is trading at 86.63 at the time of this writing, we are closing 20% of the short trade at market price and shift the protective stop to the entry as it is a daily entr

AUDUSD Trade Alert

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The Weekly Update: Focusing on China CPI

AUDUSD Daily Chart 16/02/17

AUDUSD long at market price (0.7691)
Take profit: 0.7795
Protective stop: 0.7665
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 5 days

Note: We decided to opt for AUDUSD. There are elements of risk in initiating the long trade, if timed correctly the gains should materialize during the Asian session.

17/02/17 UPDATE: AUDUSD triggered the protective stop. The trade was in approximately +20 pips profit but the gains were unsustainable. We knew the risk we were taking in the long trade but our exposure to AUDUSD was minimal

17/02/17 UPDATE II: CADJPY is trading at 86.19 at the time of this writing, we are closing 40% of the short trade at market price and shift the protective stop to 87.05,

GBPJPY Trade Alert

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The Weekly Update: Focusing on China CPI

GBPJPY 4hr Chart 20/02/17

GBPJPY short at market price (140.92)
Take profit: 139.05
Protective stop: 141.70
Risk Ratio (RR): 1 : 2.4 (approx.)
Estimated duration: 5 days

Note: This is a 4hr entry, the potential drawdown is a re-test of 141.25. Aside re-testing the breached support (141.25) the moving averages (21MA in black, 55MA in orange) may also act as a firm resistance.

21/02/17 UPDATE: GBPJPY spiked above the 55MA, triggering the protective stop. The price was caught between the MA’s and eventually broker higher.

EURUSD Trade Alert

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The Weekly Update: Focusing on China CPI

EURUSD Daily Chart 21/02/17

EURUSD long at market price (1.0536)
Take profit: 1.0800
Protective stop: 1.0440
Risk Ratio (RR): 1 : 2.7 (approx.)
Estimated duration: 14 days

Note: We are layering the stop beneath 11th January’s lows as a precaution. The dip in the last minute prior to the daily close provided us with an entry. The key reason for EURUSD selling are expectations for a rate hike in March. As noted earlier we do not expect the Fed to hike rates until June. This is a daily entry.

22/02/17 UPDATE: AUDCHF is trading at 0.7780 at the time of this writing, we are closing 20% of the long trade at market price.

22/02/17 UPDATE II: CADJPY tested 85.70, which we marked on the chart. There is a fair possibility the support will hold. As a precaution we are closing 20% of the short trade at market price (86.10) and shift the protective stop to 86.55. We will be relatively close to the market.

23/02/17 UPDATE: EURUSD is trading at 1.0578 at the time of this writing, we are closing 20% of the long trade at market price and shift the protective stop to the entry

23/02/17 UPDATE II: We have the option to lower the stop and then decide whether to exit the trade on Friday but we decided to exit the trade. CADJPY is trading at 85.98 at the time of this writing, we are closing the short trade at market price.

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The Weekly Update: Focusing on China CPI

CADJPY Daily Chart 26/02/17

Please note the above screenshot was taken on Sunday, 26/02/17. CADJPY resumed its downtrend on Friday (24/02/17) but we have already exited the trade. Our screenshot from 23/02/17 was deleted by error.

24/02/17 UPDATE: AUDCHF is trading at 0.7728 at the time of this writing. As opposed to EURUSD, AUDCHF spread may widen to 50 pips at the opening on Sunday. We are shifting the stop from the entry to 0.7625.

24/02/17 UPDATE II: We will begin by highlighting that we are aware that stops will not hold if any gaps take place on Sunday. EURUSD is trading at 1.0558 at the time of this writing. We are closing 10% of the long trade at market price, stop remains at the entry despite the minimal distance from the market.

28/02/17 UPDATE: We were planning to long EURJPY following the recent dip but the bullish correction will be challenging as we are not too keen on initiating long trades following strong gains. As EURJPY gains may continue, we may witness a strong USD as a result of Trump’s speech. This is a very early indication and does not justify exiting EURUSD. We are however closing 40% of the long trade at market price (1.0571). Stop remains at the entry. (the protective stop was later triggered by the market, we have ended the trade with a minor profit),

28/02/17 UPDATE: We have decided to close AUDCHF at market price (0.7697). A portion of the profit came from the positive interest. We cannot widen the stop prior to the daily close and then shift the stop back to the entry as it may not hold should the GDP come below expectations. We may re-enter AUDCHF some time in March.

The Weekly Update: Focusing on China CPI

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The Weekly Update: Focusing on China CPI
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The Weekly Update: Focusing on China CPI