The Weekly Update: French Elections and GBP Trade Setup

According to the French elections exit polls Macron and Le Pen passed the first round of elections. This comes as no surprise as both were expected to proceed to the second round by all polls. Nevertheless, at the time of this writing EUR pairs are expected to gap higher, which highlights the sensitivity to general elections following Trump’s victory. What may attract some attention this week is Trump’s tax plan, which may be revealed on Wednesday. The healthcare bill is likely to resurface, which may suggest some volatility be may be seen in U SD pairs and crosses. Following the failure to pass the prior bill the market would like to see whether Trump has the ability to implement his plans, which may determine the trend of the US Dollar against a basket of currencies.

Before discussing the US Dollar (USD) we would like to focus on GBP in the Forex market.

GBPCAD Daily Chart

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The Weekly Update: French Elections and GBP Trade Setup

GBPCAD Daily Chart 23/04/17

We are not expecting crude oil to assist CAD strength, we suspect profit taking combined with risk appetite mode may be the trigger for general strength of the commodity currencies. We are aware OPEC may be preparing for an extension of the crude oil output. Although GBP appears to be due for moderate gains in the market, we are not convinced this is indeed the case. GBPUSD is the only pair that is currently not inline with other GBP pairs and crosses.

Should GBP weakness materialize we are expecting it to begin within the next 10 days. Due to brexit and the upcoming elections it is difficult to determine what may be the trigger. Our assumption is that it may be related to the Scottish elections, due to take place on 4 May, 2017. Although the current polls suggest the SNB are to lose 11 seats in parliament, any shift of momentum that favor the SNP may increase the possibility for a second independence referendum in Scotland, which may weigh on GBP. We will re-assess USD pairs and crosses as we near Wednesday.

GBPCAD Trade Alert

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The Weekly Update: French Elections and GBP Trade Setup

GBPCAD Daily Chart II 23/04/17

GBPCAD short at market price (1.7275)
Take profit: 1.6870
Protective stop: 1.7445
Risk Ratio (RR): 1 : 2.5 (approx.)
Estimated duration: 10 days

The potential drawdown is a re-test of 1.7350

As President Trump announced 20% tariff on Canadian lumber CAD weakened against a basket of currencies, triggering the protective stop in GBPCAD.

GBPJPY Trade Alert

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The Weekly Update: French Elections and GBP Trade Setup

GBPJPY Daily Chart 27/04/17

We have a daily entry in GBPJPY. Our initial impression is that the weakness may stem from a strong Japanese yen although we are expecting a weak GBP in the medium term. We are aware the UK GDP is due on Friday.

GBPJPY short at market price (143.53)
Take profit: 140.60
Protective stop: 144.50
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 7 days

EURJPY Trade Alert

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The Weekly Update: French Elections and GBP Trade Setup

EURJPY Daily Chart 01/05/17

EURJPY short at market price (121.90)
Take profit: 120.10
Protective stop: 122.47
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 7 days

Note: This is a daily entry. We are exercising a fairly tight stop at we suspect a top has been made.

Both EURJPY and GBPJPY triggered the protective stop loss orders.

NZDCHF Trade Alert

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The Weekly Update: French Elections and GBP Trade Setup

NZDCHF Daily Chart 03/05/17

The dip in NZD pairs and crosses is sufficient, mainly due to the FOMC statement. We are opting for NZDCHF, we may initiate another trade after the daily close.

NZDCHF long at market price (0.6831)
Take profit: 0.7020
Protective stop: 0.6765
Risk Ratio (RR): 1 : 2.7 (approx.)
Estimated duration: 14 days

GBPAUD Trade Alert

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The Weekly Update: French Elections and GBP Trade Setup

GBPAUD Daily Chart 03/05/17

We have noted the intraday negative divergence in GBPAUD as well as intraday positive divergence in AUDUSD. We decided to opt for GBPAUD via a relatively tight stop. We are taking a risk by opting for GBPAUD rather than AUDUSD, the Australian trade balance may provide the initial trigger.

GBPAUD short at market price (1.7329)
Take profit: 1.7020
Protective stop: 1.7425
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 7 days

Both trades triggered the protective stops.

GBPJPY Trade Alert

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The Weekly Update: French Elections and GBP Trade Setup

GBPJPY Daily Chart 08/05/17

GBPJPY short at market price (146.53)
Take profit: 144.70
Protective stop: 147.20
Risk Ratio (RR): 1 : 2.6 (approx.)
Estimated duration: 7 days

AUDUSD Trade Alert

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The Weekly Update: French Elections and GBP Trade Setup

AUDUSD Daily Chart 08/05/17

AUDUSD long at market price (0.7384)
Take profit:0.7485
Protective stop: 0.7340
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 7 days