The Weekly Update: Preparing for the SPD Coalition Deal Vote

Italian Elections and SPD Final Vote

For the past week we remained on hold as we noted many currency pairs are held in a price range. The range itself is not too concerning. Our main concern is 4 March, 2018. Aside the general elections in Italy the SPD members voting results on the party’s coalition deal will also be published on 4 March.

These are 2 fairly significant risk events that are due to place on the same day when global markets are closed. We cannot risk initiating trades while dismissing 4 March. Any new trades we initiate are likely to be closed prior to the weekly close unless we have firm evidence that the trend is expected to continue as a result of the gap that is likely to take place next Sunday.

AUDJPY and EURUSD are conflicting each other. The only scenario where no conflict may be seen is if the market does not react to the events that are due on 4 March, which is highly unlikely.

At the time of this writing we are inclined to roll EURUSD over the weekend but we will have to re-assess our open trades prior to the weekly close. The SPD vote has more significance than the Italian elections as it may send Germany for snap elections.

The main event this week is Fed Powell’s testimony (due on Tuesday and Wednesday). As Powell is the new Fed governor the testimony could trigger some volatility in the market. We will discuss Theresa May’s upcoming speech on Friday later this week.

We have some indications for a weak Japanese yen. We suspect the trigger may be related to Powell’s testimony. Based on the charts the weakness may be fairly swift rather than gradual gains. We decided to opt for CADJPY as the CPI that was released on Friday may also sustain the Canadian Dollar throughout the week.

We are aware that opting for CADJPY will increase our exposure to JPY. We must highlight CADJPY will be closed by the end of the week whether it is in a loss or in a profit.

CADJPY Technical Strategy

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The Weekly Update: Preparing for the SPD Coalition Deal Vote

CADJPY Weekly Chart 25/02/18

Although it may appear to be a weekly entry there are indications for a weak JPY. We had a choice between EURJPY and CADJPY, we are unlikely to initiate new trades in the Euro this week. The potential drawdown is a re-test of 83.80.

We are also noting early indications for a strong CAD (following the CPI). We have to be fairly cautious though we cannot roll any new trades over the weekend.

CADJPY Technical Strategy

We should say that we are fairly displeased with the gap in CADJPY as it increased the required stop and lowered the potential profit.

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The Weekly Update: Preparing for the SPD Coalition Deal Vote

CADJPY Weekly Chart II 25/02/18

CADJPY long at market price (ask 84.67)
Take profit: 86.55
Protective stop: 83.27
Risk Ratio (RR): 1 : 1.2 (approx.)
Estimated duration: 5 days (approx.)

Relevant as long as the price is below 85.10

Note: This is a fairly poor Risk Ratio (RR). We have the ability to layer a tighter stop but we decided to not to meddle with the weekly chart. The potential drawdown is a re-test of 83.80.

As we are opting for a trade with poor RR (which is rare) we may choose to downsize the trade in a loss (should the price correct lower) prior to the protective stop should we find it to be appropriate.

We highlight that CADJPY will not be rolled over the upcoming weekend.

28/02/18 UPDATE: As the EU legal draft on the brexit was released it was rejected by Theresa May and DUP. It lead to heavy selling GBJPY, which spilled over to other JPY pairs and crosses. CADJPY triggered the protective stop as we neared the London fix, we are not re-entering the market.

CADJPY Trade Alert

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The Weekly Update: Preparing for the SPD Coalition Deal Vote

CADJPY Daily Chart 07/03/18

The dip in CADJPY took place almost immediately after the daily close. We wanted to ensure the lower support is holding.

CADJPY long at market price (ask 81.72)
Take profit: 84.45
Protective stop: 80.79
Risk Ratio (RR): 1 : 2.7 (approx.)
Estimated duration: 7 days (approx.)

Relevant as long as the price is below 82.20

Note: Key data from Canada is due within the next several hours. If timed corrected the corrective gains are expected to materialize in today’s session.

The potential drawdown is a re-test 81.35, we provided more room in an event a short-live spike is seen towards 80.90.

09/03/18 UPDATE: CADJPY is trading at 82.91 at the time of this writing, we are closing 20% of the long trade at market price and shift the protective stop to 82.00.

The Canadian employment data (due in less than 20 minutes) may trigger fairly mild volatility across CAD pairs and crosses.

11/03/18 UPDATE: We are shifting CADJPY protective stop to 82.80. We will be relatively close to the market but we are unwilling to absorb a deeper retracement should it materialize.

CADJPY triggered the protective stop at 82.80. We have ended the trade with a decent profit.

GBPCAD Trade Alert

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The Weekly Update: Preparing for the SPD Coalition Deal Vote

GBPCAD Weekly Chart 13/02/18

GBPCAD short at market price (1.8075)
Take profit: 1.7425
Protective stop: 1.8255
Risk Ratio (RR): 1 : 3.6 (approx.)
Estimated duration: 30 days (approx.)

Note: The potential drawdown is a re-test of 1.8185

15/03/18 UPDATE: GBPCAD spiked higher following a combination of corrective gains in GBP following brexit remarks and a weak CAD. This is a fairly rare adjustment, we are shifting GBPCAD protective stop to 1.8285. The stop is shifted above a higher resistance level.

GBPCAD triggered the protective stop mainly due to strong gains across GBP pairs and crosses, we are not re-entering the market.

Last Updated on February 16, 2021