The Weekly Update: RBA and China Manufacturing PMI

NZD Technical Analysis

We will begin with the Japanese yen (JPY) although it is irrelevant for the current trade alerts. The Bank of Japan (BOJ) disappointed the markets, which lead to heavy selling in USDJPY and other JPY pairs and crosses in the Foreign Exchange (Forex) market. We should say this is not the first time the BOJ disappoints. We will require further JPY appreciation in order to consider a trade in the pair.

This week we are continuing to focus on the New Zealand Dollar (NZD). After a couple of successful signals in NZD we noted the chart is indicating a possible reversal. We chose to remain in NZDCHF despite the risk bur we have liquidated most of the position with a fair profit. We chose to remain in the trade due to the Swiss Franc (CHF). The crosses we are focusing on are AUDNZD and EURNZD.

EURNZD Daily Chart

Please click on the chart to enlarge:

EURNZD Daily Chart 31/07/16

EURNZD Daily Chart 31/07/16

AUDNZD Daily Chart

Please click on the chart to enlarge:

AUDNZD Daily Chart 31/07/16

AUDNZD Daily Chart 31/07/16

EURNZD painted a reversed Head-And-Shoulders (H&S) on the daily chart. Although the current support (1.5475) we are likely to layer the protective stop below the latter support (1.5385).

We also noted a potential reversed H&S in AUDNZD daily chart. This leads us to believe we are due to witness a weak NZD in the Forex market.

The difficult part is choosing between the trades and we will explain why. The Reserve Bank of Australia (RBA) is due to release its monetary policy this week. As we emailed last week, a rate cut is not guaranteed as the CPI did not fall below expectations. The RBA may choose to remain on hold but it will be a very close call. If we enter AUDNZD we are vulnerable to the RBA rather than just the New Zealand Dollar and must determine whether the Aussie is expected to post further gains in the market.

By opting for EURNZD we are almost immune to the RBA, however, the negative interest is higher and we cannot rule out a re-test of a lower level before a resumption of the uptrend, which means a larger stop. If China Manufacturing PMI disappoints it may lead to both AUD and NZD weakness.

We are currently leaning towards EURNZD, we may consider a trade in AUD on Monday’s close. We will make our final decision after the opening of the markets. The reason why it is a difficult decision as there are a number of possible triggers for NZD weakness including the inflation expectations on Tuesday.

The trade alert will be issued after the opening of the Forex market (21:00 GMT).

EURNZD Trade Alert

It was a tough decision but we decided to opt for EURNZD rather than AUDNZD. We will review AUD pairs and crosses on Monday’s daily close.

Please click on the chart to enlarge:

EURNZD Daily Chart 31/07/16

EURNZD Daily Chart 31/07/16

EURNZD long at market price (1.5497)
Take profit: 1.5885
Protective stop: 1.5340
Risk Ratio (RR): 1 : 2.6 (approx.)
Estimated duration: 10 days

01/08/16 UPDATE: EURNZD is trading at 1.5562 at the time of this writing.

Please click on the chart to enlarge:

EURNZD Daily Chart 01/08/16

EURNZD Daily Chart 01/08/16

We are closing 30% of the long trade at market price and shift the protective stop to 1.5480.

04/08/16 UPDATE: EURNZD triggered the protective stop before reversing higher. We have ended the trade with a very small profit, which it will be displayed in the trades performance as break even.

The Weekly Update: RBA and China Manufacturing PMI

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The Weekly Update: RBA and China Manufacturing PMI

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The Weekly Update: RBA and China Manufacturing PMI

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The Weekly Update: RBA and China Manufacturing PMI