The Weekly Update: The New North Korea Tension

North Korea Tension

Many currency pairs and crosses are held in a range due to lack of a fundamental drives. In the past week we have witnessed some volatility as a result of specific market events that their impact on the market were short-lived.

One of the more interesting events this week aside Jackson Hole is the joined military exercise between the US and South Korea. North Korea threatened to react to the exercise that is due to begin tomorrow. We have noticed CHF has become a better alternative to JPY in risk aversion events, however, we are still reluctant to hold long CHF positions.

There are some indications for possible risk aversion mode, possibly as a result of the military exercise. We would have liked to see stronger indications but this is what the charts are providing.

AUDJPY Daily Chart

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The Weekly Update: The New North Korea Tension

AUDJPY Daily Chart 20/08/17

AUDJPY Strategy

AUDJPY painted top H&S on the daily chart. We have been tracking the pattern for several days but due to 16 August daily close we refrained from considering a trade in the pair.

The retracement that took place the following day affirmed the strength of the resistance at 87.40. Shorting AUDJPY means tolerating a potential re-test of 87.40 and the negative interest that will be incurred at the rollover.

AUD is often sold during a risk aversion mode, however, we have noticed in the past week this was not the case. It is too early to determine whether AUD correlation to risk events permanently changed or what we have witnessed last week was temporary. The Japanese yen however continues to enjoy safe-haven flows.

GBPAUD Daily Chart

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The Weekly Update: The New North Korea Tension

GBPAUD Daily Chart 20/08/17

GBPAUD Strategy

Although we are displaying the daily chart this is a potential 4hr entry. The positive divergence that is seen in GBPAUD as well as GBPNZD and GBPCAD is an early indication of possible weakness in the commodity currencies.

We selected GBPAUD due to the interest rate differentials as we do not wish to re-enter GBPCAD. The decision we will have to make is whether potential weakness of the commodity currencies will be as a result of the US-South Korea military drill or as a result of corrective weakness.

AUDJPY will be more appropriate than GBPAUD due to the recent AUD currency correlation we discussed earlier as we would rely on a firm JPY despite the negative interest in an event of the tension will esecellate between the US and North Korea. This will not be a simple decision to make.

We will issue an update after the opening of the Forex market.

GBPAUD Trade Alert

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The Weekly Update: The New North Korea Tension

GBPAUD Daily Chart II 20/08/17

GBPAUD long at market price (ask 1.6233)
Take profit: 1.6500
Protective stop: 1.6125
Risk Ratio (RR): 1 : 2.45 (approx.)
Estimated duration: 14 days (approx.)

Note: The potential drawdown is a re-test of 1.6180.

USDCAD Trade Alert

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The Weekly Update: The New North Korea Tension

USDCAD 4hr Chart 22/08/17

USDCAD long at market price (1.2541)
Take profit: 1.2650
Protective stop: 1.2500
Risk Ratio (RR): 1 : 2.75 (approx.)
Estimated duration: 3 days (approx.)

Note: This ia 4hr entry.

22/08/17 UPDATE: We are shifting USDCAD protective stop to 1.2533.

23/08/17 UPDATE: We are shifting USDCAD protective stop to 1.2540. We will be relatively close to the market but this is a 4hr entry. New Zealand growth was downgraded during the Asian session, which triggered some NZD weakness. The downgrade itself is not surprising. Many currency pairs are still held in a tight range at the time of this writing.

23/08/17 UPDATE: USDCAD triggered the protective stop at 1.2540, we are not re-entering the market. The recent gains in crude oil following the inventories data firmed CAD against a basket of currencies.

EURGBP Trade Alert

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The Weekly Update: The New North Korea Tension

EURGBP Daily Chart 24/08/17

EURGBP short at market price (0.9217)
Take profit: 0.9075
Protective stop: 0.9266
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 7 days (approx.)

Note: We are taking a risk by initiating EURGBP short trade as the entry is not as firm as we would have liked. Our assumption the weakness may be EUR-related rather than GBP.

25/08/17 UPDATE: EURGBP triggered the protective following Draghi’s speech, we are not re-entering the market. We took a risk by initiating the long trade, we were in a minor profit but it was fairly insignificant.

30/08/17 UPDATE: GBPAUD is trading at 1.6362 at the time of this writing, we are closing 40% of the long trade at market price.

30/08/17 UPDATE II: GBPAUD is stuttering around 1.6350, a price level we marked on the chart and discussed in the strategy. Failing to firmly close above 1.6350 may suggest the exhaustion of the recent gains. Although we can wait for until we near the daily close the odds for a +50 pips spike are low.

We are closing GBPAUD long trade at market price (1.6350), our patience in this incident has paid off.


AS ALL THE SIGNALS IN THIS PAGE ARE CLOSED THE STRATEGIES ARE NOW ACCESSIBLE TO ALL TRADERS



The Weekly Update: The New North Korea Tension

The Weekly Update: The New North Korea Tension