The Weekly Update: Monitoring EURUSD Price Action

GBP and EURUSD Analysis

The Bank of England (BOE) was forced to hike rates due to inflation figures that pointed to a rise in food prices that we highlighted when the CPI figures were released. The BOE is expecting inflation to peak in October and then subside in coming months as a result of the rate hike.

The BOE also affirmed due to GBP weakness in the Foreign Exchange market (as a result of the brexit) triggered caused inflation to overshoot. We should have more clarity on the brexit by the end of the year, we expect key announcements to be made in December.

As the hike was fully priced-in, as the BOE affirmed it is expecting to only hike rates twice (total of 50bps) in the next three years GBP was heavily sold. This does not meant to say the BOE cannot hike rates at faster pace if required, the brexit process, particularly an agreement on a transition deal is one of the factors mentioned by Carney.

We have been monitoring EURUSD for some time but still lack a firm entry based on the daily chart.

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The Weekly Update: Monitoring EURUSD Price Action

EURUSD Daily Chart 05/11/17

EURUSD initial objective based on the daily chart is 1.1390, however, we may face firmer downtrend in the pair. The top H&S may suggest Euro Dollar may trade as low as 1.1100 if not lower. We must have some corrective gains in the pair in order to consider entering the market.

We added the latter daily resistance in EURUSD. At the time of this writing the projected downtrend may only be negated should EURUSD post a daily close above 1.1880.

CADJPY Strategy

We would like to display the daily chart that forced us to exit CADJPY on Friday. By the book we were meant to absorb the potential retracement as the entry was based on the weekly chart.

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The Weekly Update: Monitoring EURUSD Price Action

CADJPY Daily Chart 05/11/17

Although CADJPY may appear to provide a short entry the weekly chart is still suggesting further gains. Should the resistance hold we would expect the lower support line (in blue) to hold, in such an event it may provide a long entry in the cross.

We are also aware USDJPY has reached a resistance level, which may suggest some some JPY strength in the market but we are not opting for USDJPY as the entry is not as firm as we would like.

EURNZD 4hr Chart

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The Weekly Update: Monitoring EURUSD Price Action

EURNZD 4hr Chart 07/11/17

We are displaying the 4hr chart although it is a daily entry. The main risk is a kick towards 1.6915. The region between 1.6790 to 1.6915 may be filled with stops. We cannot determine whether the market may attempt to trigger the stops in a short-lived spike, which must be factored into the stop.

The RBNZ monetary policy tomorrow may also widen the spread prior and during the rate statement. The RBNZ is likely to be pleased with NZD weakness and a remark in the statement referring to NZD may be seen. We are likely to initiate the trade prior to the daily close.

EURNZD Trade Alert

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The Weekly Update: Monitoring EURUSD Price Action

EURNZD 4hr Chart II 07/11/17

EURNZD short at market price (bid 1.6781)
Take profit: 1.6385
Protective stop: 1.6960
Risk Ratio (RR): 1 : 2.3 (approx.)
Estimated duration: 10 days (approx.)

Price range: Relevant as long as the price is above 1.6735

Note: The potential drawdown is a retest of 1.6915 as displayed on the chart. The RBNZ statement (due tomorrow) will widen the spread in EURNZD as the statement is published.

We suspect numerous stops are layered between 1.6790 – 1.6915. There is a fair possibility for a short-lived spike but as we cannot determine whether it will materialize we will absorb any corrective gains. Do note EURNZD is an extremely volatile cross.

In an event we will be too close to the market prior to the RBNZ statement we will have to provide more room for the trade (shift the stop) to withstand the spread widening due to the RBNZ monetary policy.

08/11/17 UPDATE: EURNZD is trading at 1.6721 (ask) at the time of this writing, we are closing 20% of the short trade at market price.

08/11/17 UPDATE II: EURNZD is trading at 1.6693 at the time of this writing, we are closing 20% of the short trade at market price. We are slightly more aggressive with the partials’ realization.

08/11/17 UPDATE III: The RBNZ governor expressed his content with NZD weakness in the press conference (which is ongoing at the time of this writing). We remind that a new governor is expected to be appointed in March 2018.

We decided to be more aggressive with EURNZD, we expected a more volatile reaction. NZD is still expected to maintain its strength but our tolerance towards corrective gains (in EURNZD) is fairly low.

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The Weekly Update: Monitoring EURUSD Price Action

EURNZD 4hr Chart 08/11/17

EURNZD is trading at 1.6655 at the time of this writing, we are closing 30% of the short trade at market price (the protective stop was later shifted to the entry).

09/11/17 UPDATE: EURNZD corrected higher as we anticipated, the corrective gains triggered the protective stop at the entry, we are not re-entering the market.


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


The Weekly Update: Monitoring EURUSD Price Action

The Weekly Update: Monitoring EURUSD Price Action