The Weekly Update: NZD and USDJPY Trading Strategy

Technical Strategies

The Bank of England (BOE) pressured GBP towards the end of the week as the odds for an imminent rate hike remain slim despite the rise in inflation. President Trump firing the FBI director (Comey) was reflected in a weak US Dollar (USD) in the Forex market. What has finally pressured USD was the inflation data (CPI) on Friday, which came in just shy of market expectations. The UK average earnings index is the key data this week as it was discussed by the BOE.

AUDNZD 4hr Chart

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The Weekly Update: NZD and USDJPY Trading Strategy

AUDNZD 4hr Chart 14/05/17

AUDNZD Strategy

AUDNZD has posted a reversed Head-And-Shoulders (H&S) on the 4hr chart where the neckline is aligned with the 200MA. Should the cross break above the MA it may affirm stronger gains in AUDNZD. The imminent trigger is New Zealand’s Retail sales, due shortly after the opening of the Forex market. A gap higher may not invalidate the entry, however, we prefer a gap lower which will tighten the stop and improve the risk ratio of the long trade. Strong retail sales may trigger the protective stop as it is an intraday entry. Should retail sales have no impact on Aussie Kiwi we are expecting AUD to continue to strengthen this week. The employment data is the key figure for the Australian Dollar in the upcoming week.

USDJPY Weekly Chart

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The Weekly Update: NZD and USDJPY Trading Strategy

USDJPY Weekly Chart 14/05/17

USDJPY Strategy

We have noted the potential entry on Friday, we are not pleased with the weakness that took place. The top that was made on the weekly chart marks the third lower high, which may suggest Dollar yen is positioned for moderate weakness, below 108.08 within the next several weeks. Due to the recent weakness a drawdown maybe unavoidable. The drawdown may be limited to 30 – 40 pips or as high as 140 pips. A higher weekly close would have been the optimal scenario. We assume that should USDJPY correct higher it may be limited to the first half of the week. The weakness we are anticipating for the currency pair may be related to a weak USD although there are very-early indications it may also suggest a strong JPY. We therefore expect the initial weakness to be triggered by a weak USD which may then resume due to a strong Japanese yen. We prefer a gap higher in order to initiate the signal at market price. Should USDJPY post a minor gap or a gap lower we may opt for a sell limit order to narrow the potential drawdown.

We are also expecting the Canadian Dollar (CAD) to recover in the market in tandem with crude oil prices. We may increase our short net exposure to CAD this week. After the UK elections take place the brexit negotiations may dominate the market. As we also updated via emails, the ECB is unlikely to alter its monetary policy until December unless an extraordinary market event takes place. The main concern for all central banks is Scotland separating itself from the UK in a second referendum. The referendum, if indeed takes place is unlikely to be in 2017.

AUDNZD Trade Alert

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The Weekly Update: NZD and USDJPY Trading Strategy

AUDNZD 4hr Chart II 14/05/17

AUDNZD long at market price (1.0770)
Take profit:1.0925
Protective stop: 1.0708
Risk Ratio (RR): 1 : 2.5 (approx.)
Estimated duration: 4 days

Note: This is a 4hr entry, targeting the upcoming retail sales data from New Zealand. Strong data may trigger the stop, this is not a trade we are planning to carry for several weeks. Please note as the data is due in a little over an hour we may shift the stop to the entry should the data trigger a bullish spike in AUDNZD.

USDJPY Trade Alert

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The Weekly Update: NZD and USDJPY Trading Strategy

USDJPY Weekly Chart II 14/05/17

USDJPY short at market price (113.22)
Take profit:107.80
Protective stop: 115.60
Risk Ratio (RR): 1 : 2.3 (approx.)
Estimated duration: 30 days

Note: This is a trade where the potential drawdown ranges from as little as 20/30 pips to over 100 pips.We did consider a sell limit order but there is a fair scenario the potential drawdown may be limited can be absorbed. This is not a tight stop as we chose to layer the protective stop above March’s high.

15/05/17 UPDATE: Although there is still room for AUDNZD to correct higher we are not adopting a wait-and-see approach. AUDNZD is trading at 1.0766 at the time of this writing, we are closing 20% of the long trade at market price. Should the price continue trading lower we will continue to limit our exposure.

16/05/17 UPDATE: USDJPY is trading at 113.02 at the time of this writing, we are closing 10% of the short trade at market. The partial is taken to reduce the holding costs of the short trade.

17/05/17 UPDATE: The risk aversion is strengthening the yen while weakening the commodity currencies, particularly AUD. We are limiting our exposure in AUDNZD although the cross should withstand the pressure. We are downsizing the trade as it posted a 4hr close below 1.0743. AUDNZD is trading at 1.0738 at the time of this writing, we are closing 30% of the long trade at market price.

17/05/17 UPDATE II: USDJPY was within a near proximity to 111.55, which we marked on the chart. The selling took place a faster pace than we have anticipated. USDJPY is trading at 111.67 at the time of this writing, we are closing 40% of the short trade at market price.

17/05/17 UPDATE III: Such price movements are often followed by corrective gains. It is still early to confirm this would indeed be the case but we are uncertain the risk aversion the pressured USDJPY will continue into Thursday’s session.

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The Weekly Update: NZD and USDJPY Trading Strategy

USDJPY Weekly Chart 17/05/17

This is not a simple decision to make but we have decided to close USDJPY short trade at market price (111.36).

17/05/17 UPDATE II: AUDNZD triggered the protective stop, we have downsized the trade to reduce the loss.

The Weekly Update: NZD and USDJPY Trading Strategy

As all trades are closed this page can now be accessed by all traders. Open trades and relevant intraday strategies are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
The Weekly Update: NZD and USDJPY Trading Strategy

Last Updated on June 10, 2017