The Weekly Update: Refining NZD Technical Entries

The US CPI

The US Consumer Price Index (CPI) that is scheduled for release on Friday is one of the key figures this week. Some FOMC members have already expressed their concerns on weak inflation figures. Should the CPI miss the market expectations it may dent odds for multiple rate hikes in 2018.

As we updated throughout the past week via emails there are indications for USD strength. It is too early determine whether the potential USD strength is related to the upcoming CPI. Should we witness USD strength during the week we are uncertain the US CPI will favour a firm USD but we will re-evaluate our stance on Wednesday.

EURNZD Signal Strategy

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The Weekly Update: Refining NZD Technical Entries

EURNZD Daily Chart 07/01/18

Although we are displaying the daily chart we would like to first discuss the weekly chart. We noted the potential for a top Head-And-Shoulders (H&S) reversal pattern in the weekly chart last Sunday. We were waiting to see whether the price will post a weekly close around 1.7030, which failed to materialize.

1.6750 is the neckline of the top H&S. Should EURNZD correct higher, preferably in the next 24 hours to test the breached daily support (in blue) it may provide a short entry in the cross. In an event there are no corrective gains it may be challenging to enter EURNZD.

NZDCHF Signal Strategy

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The Weekly Update: Refining NZD Technical Entries

NZDCHF Daily Chart 07/01/18

NZDCHF posted reversed H&S in the daily chart. There may be some retracement towards 0.6950 (which is not guaranteed to materialize) as the price often retraces lower in similar breakouts. We should also note that reversed H&S is also being painted in the weekly chart. As opposed to NZDCHF daily chart the price will require to firmly break above 0.7022 in order to affirm further gains.

In an event EURNZD does correct higher NZDCHF may correct lower, however, we are expecting such a retracement to be fairly limited. It is quite challenging to determine what may trigger NZD strength in the market, our assumption is that it may be related to China CPI that is due later this week.

EURUSD and USDCHF Update

As discussed last week there may be a potential short entry in EURUSD as well as a possible long entry in USDCHF. We had the ability to long USDCHF on Thursday’s daily close, which we dismissed. Initiating a trade in either of those currency pairs at current levels may expose us to stop hunting.

We suspect many traders have noticed the short entry in EURUSD with numerous stops layered above 1.2100. We are avoiding EURUSD and USDCHF for the time being but we will keep monitoring these pairs throughout the week.

Please note the spread in NZD crosses may widen at the opening of the Foreign Exchange (Forex) market, we may wait for the spread to tighten before considering to capitalize over NZD technical signal.

NZDCHF Trade Alert

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The Weekly Update: Refining NZD Technical Entries

NZDCHF Daily Chart II 07/01/18

NZDCHF long at market price (ask 0.6989)
Take profit: 0.7130
Protective stop: 0.6920
Risk Ratio (RR): 1 : 2.1 (approx.)
Estimated duration: 15 days (approx.)

Price range: Relevant as long as the price is below 0.7000

Note: The potential drawdown is a re-test of 0.6950. We have given ourselves more distance from the market in an event the spread widens to 40 pips until it stabilizes. We may tighten the protective stop on Monday if found appropriate.

08/01/18 UPDATE: We are shifting NZDCHF protective stop to 0.6930. As 0.7022 was tested in today’s session there may be some corrective weakness although it is not guaranteed to materialize.

09/01/18 UPDATE: NZDCHF is trading at 0.7053 at the time of this writing.

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The Weekly Update: Refining NZD Technical Entries

NZDCHF Daily Chart 09/01/18

We are closing 30% of the long trade at market price.

GBPJPY Trade Alert

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The Weekly Update: Refining NZD Technical Entries

GBPJPY Weekly Chart 09/01/18

GBPJPY long at market price (ask 152.48)
Take profit: 157.50
Protective stop: 150.30
Risk Ratio (RR): 1 : 2.9 (approx.)
Estimated duration: 17 days (approx.)

Price range: Relevant as long as the price is below 153.20

Note: This is a weekly entry. The potential drawdown is re-test of 151.25. We remind that GBPJPY is an extremely volatile cross. Once GBJPY firmly breaks above 153.30 we would expect the gains to continue throughout the week.

The key data is the UK manufacturing production (due tomorrow). China CPI could trigger some volatility in JPY pairs and crosses although past data (China CPI) failed to have a meaningful impact on JPY pairs and crosses.

09/01/18 UPDATE II: We are shifting NZDCHF protective stop to 0.6980.

10/01/18 UPDATE: We have a choice between shifting the protective stop to 0.7010 or closing NZDCHF at market price. There is a warning signal corrective weakness may materialize, which is insufficient to initiate a trade but it acts as a warning to those that are holding a long position.

We decided to exit NZDCHF long trade at market price (0.7034). We are aware of the positive interest at the rollover but for several pips we decided not to wait.

10/01/18 UPDATE II: The BOJ is due to conduct is bonds-buying operation (1-10yr maturities) at 01:10am GMT. We cannot determine how significant it will be but we will be unable to absorb any dips in GBPJPY.

There are some indications USDJPY weakness may be coming to an end. USDJPY may still trade lower towards 111.28 before reversing higher. Using USDJPY / GBPJPY correlation, such a dip could drive GBPJPY to 114.30. It is important to highlight that we are not increasing our exposure to JPY regardless of the potential recovery in USDJPY.

We are shifting GBPJPY protective stop to 150.20.

14/01/18 UPDATE: GBPJPY triggered the protective stop before correcting higher back to the entry, we chose not to re-enter the market.

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GBPJPY Forex Signal 14 January 2018

GBPJPY 60min Chart 14/01/18

The protective stop was triggered on remarks from Theresa May that a second brexit referendum will not take place. The reaction was short-lived, however, we rarely re-enter trades that are stopped out.


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


The Weekly Update: Refining NZD Technical Entries

The Weekly Update: Refining NZD Technical Entries

Last Updated on January 14, 2018