The Weekly Update: The Catalan Referendum and EURUSD

The Catalan Referendum

No significant price movements took place in the FX markets in the past week. We were able to capitalize over the Canadian Dollar (CAD) weakness where we have successfully anticipated BOC Poloz speech and Canada Gross Domestic Product (GDP) to be the trigger for the weakness.

We have closed our long EURCAD short position on Friday as we began noting early indications for EUR weakness and were uncertain how EURCAD will be affected. In the past several years Catalonia has weakened the Euro when a referendum was first suggested. Madrid strongly opposed the referendum as it is today.

When Catalonia was a key fundamental factor in EUR trend in the Forex market EURUSD was fairly volatile as opposed to 2016.

It is challenging to determine how the market will react to the referendum once the results are published (the expectations are for the results to be released within the next 48 hours) as it may affect numerous currencies such as EUR, JPY, CHF, AUD and NZD or it will be largely dismissed. We will be using technical analysis as the backbone of our signals in the market.

EURUSD Daily Chart

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The Weekly Update: The Catalan Referendum and EURUSD

EURUSD Daily Chart 01/10/17

EURUSD Signal Strategy

EURUSD is positioning itself for top Head-And-Shoulders (H&S) reversal pattern. While the pair is expected to gap lower at the time of this writing at the opening of the markets we must see corrective gains towards 1.1880. to consider a short position.

We will have to assess whether 1.1880 can hold as the price as it is likely to attract a lot of attention and weak stops may be targeted on approach. Should 1.1880 be tested prior to the Catalan referendum results it may provide a fairly clean entry. We will have to wait and monitor the progress of EURUSD.

GBPUSD Weekly Chart

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The Weekly Update: The Catalan Referendum and EURUSD

GBPUSD Weekly Chart 01/10/17

GBPUSD Signal Strategy

We did discuss last week there is a weekly support at 1.3360. If we were to initiate a long trade based on the weekly chart there is a high probability the stop may be triggered should we attempt to layer the order below 1.3360. GBPUSD may re-test the neckline (in black) before correcting higher.

We will have to wait for a lower or higher price in order to consider a long position in GBPUSD. Should corrective weakness materialize in GBPUSD we may only be able to enter towards the end of the week or at the weekly close.

Technical Notes

We are noting early indications for risk aversion mode but cannot determine whether it may be related to the Catalan referendum. Similar to we have done last week with EURCAD we will wait for better price in order to consider short EUR positions. Although we only presented EURUSD we will be monitoring all EUR pairs and crosses.

In regards to CAD, we are monitoring both USDCAD and CADJPY. We will require a firmer entry to materialize in order to enter. We had the ability to long USDCAD on Thursday but as we updated via email we chose not to increase our exposure to CAD as we could not shift EURCAD protective stop to the entry. As USDCAD corrected higher we must wait for a new entry.

EURJPY Trade Alert

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The Weekly Update: The Catalan Referendum and EURUSD

EURJPY 4hr Chart 02/10/17

EURJPY short at market price (132.27)
Take profit: 130.30
Protective stop: 132.89
Risk Ratio (RR): 1 : 3.2 (approx.)
Estimated duration: 3 days (approx.)

Price range: Relevant as long as the price is above 132.05

Note: This is a 4hr entry. Generally we are not keen on initiating short trades after some selling already took place as it increases the odds for corrective gains. Based on the chart there is no indication such retracement will take place at the time of this writing but it must be anticipated.

We can incur a kick to 132.65, which is the potential drawdown. As this is a 4hr entry further weakness is expected to materialize within the next 36 hours.

Based on the chart, once the selling begin EURJPY may fall rapidly rather than gradual weakness.

03/10/17 UPDATE: EURJPY has been hovering near the protective stop’s region for some time. We are not keen on widening stops as we would rather incur the loss but we will give the pair more slack. We are shifting EURJPY protective stop to 132.93.

05/10/17 UPDATE:  EURJPY is trading at 131.93 at the time of this writing.

Please click on the chart to enlarge:

The Weekly Update: The Catalan Referendum and EURUSD

EURJPY 4hr Chart 05/10/17

We are closing 30% of the short trade at market price.We are unlikely to roll EURJPY over the weekend.

GBPUSD Trade Alert

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The Weekly Update: The Catalan Referendum and EURUSD

GBPUSD Weekly Chart 05/10/17

GBPUSD long at market price (1.3145)
Take profit: 1.3840
Protective stop: 1.2908
Risk Ratio (RR): 1 : 2.9 (approx.)
Estimated duration: 30 days (approx.)

Price range: Relevant as long as the price is below 1.3195

Note: Entering prior to the weekly close via a weekly entry has its risks. This is a fairly large stop as we are entering earlier than we should by the book as we have some indications GBPUSD may begin correcting higher in today’s session.

The potential drawdown is a re-test of 1.3050 but due to the Non-Farm Payrolls we are providing the trade with more room to retrace lower.

10/10/17 UPDATE: GBPUSD is trading at 1.3207 at the time of this writing, we are closing 20% of the long trade at market price.

Please click on the chart to enlarge:

The Weekly Update: The Catalan Referendum and EURUSD

GBPUSD Weekly Chart 10/10/17

The partial closure is intended to reduce the holding costs of the long trade.

13/10/17 UPDATE: GBPUSD is trading at 1.3273 at the time of this writing.

The Weekly Update: The Catalan Referendum and EURUSD

GBPUSD Weekly Chart 13/10/17

We are closing 10% of the long trade prior to the US CPI.

22/10/17 UPDATE: We are shifting GBPUSD protective stop to 1.3054.

29/10/17 UPDATE: We are downsizing our exposure to GBP as we require to provide more room for the trade. GBPUSD is trading at 1.3124 at the time of this writing, we are closing 20% of the long trade at market price and shift the protective stop to 1.3030.

31/10/17 UPDATE: GBPUSD is trading at 1.3281 at the time of this writing, we are closing 20% of the long trade at market price.

01/11/17 UPDATE: GBPUSD has reached a daily resistance. The possible scenarios are a break above, possibly due to the Fed monetary policy or Trump’s announcement tomorrow or a re-test of 1.3050.

Please click on the chart to enlarge:

GBPUSD Weekly Analysis 01/11/17

GBPUSD Weekly Chart 01/11/17

We have been paralyzed inside the range for some time and are unwilling to absorb such corrective weakness should it materialize. We can tighten the protective stop but we chose to exit the long trade at market price (1.3289).


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


The Weekly Update: The Catalan Referendum and EURUSD

The Weekly Update: The Catalan Referendum and EURUSD