The Weekly Update: The PBOC Finally Takes Action

Measuring the Impact of the PBOC

We are currently holding a long trade in EURUSD, which is in approximately +240 pips profit at the time of this writing. The People’s Bank of China (PBOC) decision to slash rats for all banks by 100 basis points (bps) is likely to trigger moderate gaps in the market in which we would expect to contribute to our long positions in Brent crude oil and Euro-Dollar. The aggressive easing measures taken by the PBOC were widely expected by us and we are somewhat surprised of the central bank’s hesitation to act.

The news are likely to have a severe impact on on numerous currencies in the Foreign Exchange market and will toughen our trading strategies in the market. It is essential to determine whether the PBOC actions will have a medium-term effect on the currencies or it will be short-lived, which may enable us to exercise buy/sell on dips strategies.  Our first focus, naturally, will be on one of the commodities currencies, the New Zealand Dollar (NZD).

NZDUSD Technical Analysis

We attempted a long entry in EURNZD in our previous weekly update but the market failed to provide us with a clean, technical entry. This week, bearing in mind the PBOC rate cut, we discovered a possible short entry in NZDUSD.

NZDUSD Weekly Chart

Please click on the chart to enlarge:

NZDUSD Trade Alert, 19 April, 2015

NZDUSD Trade Alert, 19 April, 2015

NZDUSD has the potential for painting reversed Head-And-Shoulders (H&S) on the weekly chart but please note the right-hand shoulder was yet to be affirmed. Strong resistance is noted at 0.7760, which may act as the possible neckline of the reversal pattern. Due to the PBOC actions we are anticipating NZDUSD to gap higher but expect the weekly resistance to contain any further gains in the pair. Such a scenario will allow us to execute a short trade in NZDUSD with a relatively tight stop loss order, targeting 0.7515. We must highlight that the retracement may extend to be 0.7390 but we are not targeting such a deep correction at the time of this writing. As the trend will develop we may modify the take profit order but it is too early to be discussed at this stage.

We are not concerned by the swap rates differentials as if we are correct immediate profit should be seen upon executing the trade at the opening of the Foreign Exchange market at 21:00 GMT. We will notify you via an email when the trade is taken at the opening of the markets with the entry price and stop loss order. Our take profit as we have stated earlier is 0.7515,

NZDUSD Trade Alert Details

Entry: 0.7703 (21:03 GMT, 19/04/15)
Take profit: 0.7515
Protective stop: 0.7794
Risk Ratio (RR): 1 : 2 (approx.)
Estimated duration: 14 days

The trade alert details will be updated at the opening of the Forex market.

GBPCAD Technical Analysis

We have been observing GBPCAD for quite some time and we have succeeded in realizing over +150 pips in the pair this month. It is no secret we are favouring moderate gains in GBP in light of the upcoming elections in May 2015. We did have a technical entry on the daily close on Thursday night but in light of recent economic events, particularly from Greece we have decided to patiently wait for the weekly close.

GBPCAD Weekly Chart

Please click on the chart to enlarge:

GBPCAD Trade Alert, 19 April, 2015

GBPCAD Trade Alert, 19 April, 2015

GBPCAD reached a strong support level as evident from the above chart. If you pay attention to the monthly chart you will note a bullish flag has been confirmed where the recent weakness is merely corrective before a resumption of the medium-term uptrend. We sincerely hope that the Canadian Dollar (CAD) will benefit from the PBOC interest rate that will force GBPCAD to gap lower. This will substantially reduce the size of the required stop loss order that will be layered below the weekly support. Despite the strong Risk-Ratio (RR) we are uncomfortable using a stop that exceeds +400 pips. Depending on the opening price of GBPCAD we may employ multiple intraday time frames to layer the protective stop loss order in order to obtain a tighter stop. This of course comes with a fair risk as the odds of being stopped out is increased.

We will wait for the opening of the markets and determine what would be the best action to take. You will be instantly notified in our actions via email and the trade details will be updated on this page. We are opting for a fairly modest target for the long trade, 1.9010.

GBPCAD Trade Alert Details

Entry: 1.8267 (21:08 GMT, 19/04/15)
Take profit:1.9010
Protective stop: 1.8103
Risk Ratio (RR): 1: 5 (approx)
Estimated duration: 60 days

The trade alert details will be updated at the opening of the Forex market.

19/04/15 UPDATE: NZDUSD is trading at 0.7702. We are executing the short trade at market price, protective stop layered at 0.7794, targeting 0.7515.

19/04/15 UPDATE II: GBPCAD gapped lower but we would have preferred a larger gap.Nevertheless, we are executing the long trade at market price,  1.8267, protective stop layered at 1.8103, targeting 1.9010.

20/04/15 UPDATE: NZDUSD is trading at 0.7655, enduring the short trade is in approximately +50 pips profit at the time of this writing.

NZDUSD Weekly Chart, 20/04/15

Please click on the chart to enlarge:

NZDUSD Weekly Chart, 20/04/15

NZDUSD Weekly Chart, 20/04/15

We are closing 20% of the short trade at market price.

22/04/15 UPDATE: GBPCAD enjoyed moderate gains, taking the long trade into +120 pips profit (approx.) at the time of this writing.

GBPCAD Weekly Chart, 22/04/15

Please click on the the chart to enlarge:

GBPCAD Weekly Chart, 22/04/15

GBPCAD Weekly Chart, 22/04/15

We are closing 20% of the long trade at market price.

23/04/15 UPDATE: NZDUSD continued to be heavily sold at the time of this writing, affected by weak data from China, renewed expectations for the RBNZ to ease its monetary policy and an earthquake that occurred overnight in Wellington.

NZDUSD Weekly Chart

Please click on the chart to enlarge:

NZDUSD Weekly chart, 23/04/15

NZDUSD Weekly chart, 23/04/15

NZDUSD is trading at 0.7551 at the time of this writing. We have decided to close the trade at market price, earning a profit of +151 pips.

24/04/15 UPDATE: GBPCAD is trading at 1.8466 at the time of this writing as we near the end of the daily session. We are shifting the protective stop to the entry and close 20% of the long trade at market price.

29/04/15 UPDATE: GBPCAD is trading at 1.8521, within days of the UK elections.

GBPCAD Daily Chart, 29 April 2015

Please click on the chart to enlarge:

GBPCAD Daily Chart, 29/04/15

GBPCAD Daily Chart, 29/04/15

We are closing 20% of the long trade at market price and shift the protective stop to 1.8345.

30/04/15 UPDATE: GBPCAD is trading at 1.8600 at the time of this writing following a poll showing Conservatives are in the lead. We are shifting the protective stop to 1.8480.

03/05/15 UPDATE: With a slight delay, GBPCAD triggered the protective stop after it as shifted above the entry while realizing partials. We have ended GBPCAD long trade with a decent profit.

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The Weekly Update: The PBOC Finally Takes Action

The Weekly Update: The PBOC Finally Takes Action
                                             The Weekly Update: The PBOC Finally Takes Action
The Weekly Update: The PBOC Finally Takes Action
                                         The Weekly Update: The PBOC Finally Takes Action
The Weekly Update: The PBOC Finally Takes Action


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