The Weekly Update: Risk Event in Global Markets, USDJPY and Gold

The FBI announcement on re-opening the investigation against Hillary Clinton triggered heavy USD weakness in the Foreign Exchange (Forex) market and lead to moderate weakness in global indices. The timing of the USD weakness occurred prior to the monthly close, which toughens the entry in the market as we have been observing USDJPY and EURUSD. We successfully capitalized on Euro Dollar via an intraday entry but unfortunately the price stuttered near one of the key intraday levels we presented, which forced us to exit the long trade.

The obvious trigger for USDJPY possible weakness is the Bank of Japan (BOJ) monetary policy later this week. There has been conflicting reports earlier this month that BOJ is unlikely to take any easing measures in its upcoming meeting. However, it is insufficient to trigger a monthly reversal in Dollar yen. A risk aversion event is required to trigger such weakness, which could be the victory of Donald Trump in the upcoming elections as we have seen the heavy selling that took place on Friday following the FBI letter to congress. However, even if Donald Trump wins the elections a risk event of greater magnitude is required to trigger such weakness.

USDJPY Monthly Chart

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USDJPY Monthly Chart 30/10/16

USDJPY Monthly Chart 30/10/16

We have presented USDJPY setup in out past JPY technical coverage. The top H&S may be affirmed at the monthly close. Friday’s selling increased the possibility of re-testing 105.60 and a spike towards 106.40 cannot be ruled out. Once the neckline (100.70) gives way it may affirm strong weakness in USDJPY that may continue throughout 2017. Although the technical objective of the top H&S is at 83.50, an intervention is likely to take place beforehand to control weakness. We hope for a gap higher in USDJPY at the opening as it would reduce the size of the protective stop loss order.

This also means gold (XAU/USD) may resume its uptrend throughout 2017 on safe-haven flows. As opposed to USDJPY, the monthly chart demands a +$80.00 stop, which is excessively large. We do have the ability to enter gold via the 4hr chart but this greatly depends on the opening price of the commodity.

XAU.USD Monthly Chart

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XAU/USD Monthly Chart 30/10/16

XAU/USD Monthly Chart 30/10/16

XAU/USD 4hr Chart

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Gold 4hr Chart 30/10/16

Gold 4hr Chart 30/10/16

Based on these projections we may face a volatile year in 2017, possibly towards the end of 2016. We have seen throughout 2016 that EURUSD has enjoyed safe-haven flows as opposed to what we have witnessed throughout the last financial crisis. A risk aversion event may not necessarily have a negative impact on EURUSD. It does mean we must proceed with caution in the MIB40.

Predicting the risk event is a difficult task as the possibilities are endless. Any gestures of war involving Russia with its neighbors or other countries may be sufficient.

USDJPY Trade Alert

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USDJPY Monthly Chart II 30/10/16

USDJPY Monthly Chart II 30/10/16

USDJPY short at market price (104.46)
Take profit: 99.60
Protective stop: 106.65
Risk Ratio (RR): 1 : 2.1 (approx.)
Estimated duration: 40 days

Note: We are entering at a relatively low price following the gap and are willing to absorb the potential retracement that may or may not occur on Monday’s session. We are using a monthly stop for the short trade.

Gold Trade Alert

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Gold 4hr Chart II 30/10/16

Gold 4hr Chart II 30/10/16

XAU/USD long at market price (1277.90)
Take profit: 1298.00
Protective stop: 1271.50
Risk Ratio (RR): 1 : 4 (approx.)
Estimated duration: 7 days

02/11/16 UPDATE:

Please click on the chart to enlarge:

USDJPY Monthly Chart 02/11/16

USDJPY Monthly Chart 02/11/16

USDJPY is trading at 105.28 at the time of this writing, we are closing 20% of the short trade at market price.

02/11/16 UPDATE II: We are layering an entry order (buy limit) in EURNZD. We did consider entering at market price and absorbing the potential drawdown but made final decision to opt for an entry order. We have until the end of the week for the order to be triggered.

EURNZD Entry Order

EURNZD long at 1.5140 (entry order)
Take profit: 1.6050
Protective stop: 1.4944
Risk Ratio (RR): 1 : 4 (approx.)
Estimated duration (once triggered): 40 days

02/11/16 UPDATE III: XAU/USD (gold) protective stop has been triggered. We emailed all our subscribers that the spike was probably aimed at stops (stop hunting) but chose not to re-enter. On extremely rate occasions we re-enter trades immediately after they are stopped out.

We chose to display the current hourly chart:

XAU/USD 60min Chart 02/11/16

XAU/USD 60min Chart 02/11/16

03/11/16 UPDATE: USDJPY is trading at 102.91 at the time of this writing.

Please click on the chart to enlarge:

USDJPY Monthly Chart 03/11/16

USDJPY Monthly Chart 03/11/16

We are closing 10% of the short trade at market price and shift the protective stop to 105.70.

04/11/16 UPDATE: EURNZD is trading at 1.5190 at the time of this writing. We are closing 20% of the long trade at market price, this is a risk management maneuver.

07/11/16 UPDATE: Following the news the FBI has cleared Hillary Clinton of any criminal activity on Sunday triggered a gap in EURNZD. We have survived the gap and chose to remain in the trade.

09/11/16 UPDATE: USDJPY stop was shifted to 105.20 to reduce our exposure, EURNZD stop was shifted to 1.4895 as we were concerned the widening of the spread at the daily close would trigger the stop. In rare occasions we widen stops. USDJPY protective stop was triggered with a minor loss before falling due to the US elections before shedding +400 pips (approx.). We were able to capitalize over the move in short trades in GBPJPY and the Dow. EURNZD triggered the protective stop before reversing higher by over +500 pips.

Please click on the chart to enlarge:

EURNZD 4hr Chart 09/11/16

EURNZD 4hr Chart 09/11/16

To conclude, both USDJPY and EURNZD stops were triggered due to a spike. Such spikes are inevitable in trading. We would rather accept the loss and recover in future trades than swim aimlessly in an unnecessary drawdown.

The Weekly Update: Risk Event in Global Markets, USDJPY and Gold

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The Weekly Update: Risk Event in Global Markets, USDJPY and Gold

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The Weekly Update: Risk Event in Global Markets, USDJPY and Gold

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The Weekly Update: Risk Event in Global Markets, USDJPY and Gold

Last Updated on November 9, 2016