The Weekly Update: The ECB QE Extension Impact on EURUSD

EURUSD Analysis

The recent EUR weakness we have seen in the Foreign Exchange (Forex) market has been triggered by the ECB decision to extend the duration of the Quantitative Easing (QE) program. We have yet to witness any significant impact on the Euro due to Catalonia-Madrid tension.

We have suggested in the prior research that the ECB monetary policy may have prevented heavier selling in the Euro due to Catalonia’s independence deceleration. Due to the QE extension (by 9 months) it may be difficult to determine Catalonia’s impact on the Euro.

EURUSD Daily Chart

Please click on the chart to enlarge:

The Weekly Update: The ECB QE Extension Impact on EURUSD

EURUSD Daily Chart 29/10/17

EURUSD posted a daily close below the neckline (1.1695) after being held in a range for some time. We chose not to immediately enter upon the daily close, we will wait for dips that may allow us to enter the market. We marked the potential targets for the top H&S which has been affirmed in Euro Dollar.

It is still unclear whether EURUSD may weaken due to a weak Euro or a firm USD. There are early signals that point to a soft US Dollar against a basket of currencies aside the Euro. There can be many potential triggers for USD weakness such as the Fed monetary policy and President Donald Trump, which is expected to announce the new Fed chairman this week.

There has been reports the US President is leaning towards choosing Powell rather than Taylor, which have weakened USD on Friday. New reports suggest the decision on the Fed will be made next week but it is still possible an announcement will be made this week.

CAD Signal Strategy

We have discussed CADJPY throughout last week as we were waiting for a technical entry in the cross. Based on the weekly close it appears CAD potential strength may not be limited CADJPY but to other CAD pairs and crosses.

USDCAD Daily Chart

Please click on the chart to enlarge:

The Weekly Update: The ECB QE Extension Impact on EURUSD

USDCAD Daily Chart 29/10/17

USDCAD provided a classic short entry in the daily chart. We still require corrective gains to materialize within the next 24 hours. We may have the ability to layer a sell limit order but we often prefer initiating the trade at market price.

We have updated CADJPY weekly chart in the prior weekly update, at the time of this writing we prefer USDCAD as it also inline with the potential USD weakness we are noting against a basket of currencies.

Canada’s employment data is due at the end of the week may trigger some volatility in CAD pairs and crosses, however, any news on the NAFTA agreement ma be sufficient to prompt gains CAD. Crude oil also play a key role in CAD potential gains but we cannot determine its weight on the currency.

As we have mentioned NZDUSD throughout the week the objective of the top H&S has been met in the daily chart. We are noting a potential entry in GBPNZD but we are unlikely to opt for the cross.

NZDUSD Weekly Chart

Please click on the chart to enlarge:

The Weekly Update: The ECB QE Extension Impact on EURUSD

NZDUSD Daily Chart 29/10/17

We are uncertain whether we wish to opt for NZDUSD unless it gaps lower at the opening of the Forex market. Corrective weakness is not meant to take place as opposed to USDCAD where the odds for corrective gains are higher.

To recap, we have mentioned several weeks ago that there is a conflict between NZDUSD monthly chart and daily chart. We were fully aware o the top H&S as it developed on the daily chart, we have avoided NZDUSD due to the technical conflict.

As we are noting potential gains in CAD and NZD, it is possible the initial trigger may China manufacturing data that is scheduled for release this week. Risk appetite mode may weaken JPY and in turn lift the commodity currencies. Due to the multiple scenarios we must highlight it is only one possibility out of many.

USDCAD Entry Order

USDCAD short at 1.2900 (sell limit order)
Take profit: 1.2640
Protective stop: 1.3005
Risk Ratio (RR): 2.6 (approx.)
Estimated duration: 10 days once triggered

Note: The market has approximately 24 hours to trigger the entry order. In an event corrective gains take place but shy from 1,2900 we will consider initiating the trade at market price either in USDCAD or CADJPY.

30/10/17 UPDATE: We are cancelling USDCAD entry order as it failed to trade near the region of 1.2900. We decided to opt for CADJPY at market price.

CADJPY Trade Alert

Please click on the chart to enlarge:

The Weekly Update: The ECB QE Extension Impact on EURUSD

CADJPY Weekly Chart 30/10/17

CADJPY long at market price (ask 88.37)
Take profit: 91.80
Protective stop: 86.90
Risk Ratio (RR): 1 : 2.3 (approx.)
Estimated duration: 21 days (approx.)

Price range: Relevant as long as the price is below 88.75

Note: The potential drawdown is a re-test of 87.50. Although the potential drawdown is higher than NZDUSD it is a weekly entry. NZDUSD is a daily entry. We are slightly late for EURNZD, which is we are opting for CADJPY.

We cannot opt for both entries as we risk being too exposed to the market in an event we require to limit our exposure.

01/11/17 UPDATE: By the book are not meant to take any action in CADJPY as it is a weekly entry. We may witness some volatility as President Trump announces the new Fed chairman on Thursday (tomorrow).

Canada’s employment data on Friday is the key event for CADJPY. As a precaution we are closing 10% of CADJPY long trade at market price (88.67).

03/11/17 UPDATE: We are closing CADJPY long trade at market price (89.50).

Please click on the chart to enlarge:

The Weekly Update: The ECB QE Extension Impact on EURUSD

CADJPY Weekly Chart 03/11/17

It is rather disappointing but we are reluctant to absorb such potential retracements.


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


The Weekly Update: The ECB QE Extension Impact on EURUSD

The Weekly Update: The ECB QE Extension Impact on EURUSD