The Weekly Update: The UK Elections Possible Effects on GBP

Technical Distortion Noted

Following the turbulence on Friday the technical end of multiple currency pairs was distorted. We must therefore adapt to the current market conditions and apply a cautionary stance. We are perfectly aware China HSBC final Manufacturing PMI is scheduled for release in the Asian session, which is likely to impact a basket of currencies.

After analyzing the market we are focusing on CADJPY monthly chart for our signals. Although we have spotted the technical entry at the monthly close we chose to wait for the weekly close as an additional technical confirmation.

One of our best forex signals later this month was GBPJPY trading signal.

CADJPY Monthly Chart

Please click on the chart to enlarge:

CADJPY Monthly Chart, 03/05/15

CADJPY Monthly Chart, 03/05/15

Recent gains in CADJPY painted a right-hand shoulder of the classic Head-And-Shoulders (H&S) reversal pattern. We are displeased with the fact a re-test of 99.31 was not seen by the weekly close but nevertheless it appears to be a fairly clean entry.

The natural target is often the neckline (in orange) at 90.80. However, we expect the price to pierce the neckline, which is why our bearish target for the short trade in CADJPY is 89.75.

Under standard conditions the protective stop would be placed above 99.31. Due to the spike that occurred in May 2013 there a fair possibility of a temporary rally towards 101.24 before the expected downtrend will materialize.

Despite the attractive Risk Ratio (RR) we are unwilling to exercise a +400 pips stop.  After carefully studying CADJPY on multiple time frames our protective stop will be layered at 100.79. Please note this is a monthly chart where an intraday stop is not a possibility.

We sincerely hope CADJPY will gap higher at the opening of the Forex market, which will substantially reduce the stop’s size. We will determine our entry when the markets open and notify you via an email when we decide to enter. A gap lower may toughen the entry.

CADJPY Trade Alert Details

Entry: short at market price (98.86)
Take profit: 89.75
Protective stop: 100.79
Risk Ratio (RR): 1 : 4
Estimated duration: 90 days

GBPUSD Technical Strategy

Despite GBP heavy selling on Friday as a result of the Manufacturing PMI we are still favoring a strong GBP, possibly as a result of the upcoming elections on Thursday. Although a renewed entry may emerge in GBPCAD, our focus is on GBPUSD.

If you are new to trading please see several techniques that traders use when setting the stop loss.

GBPUSD Daily Chart

Please click on the chart to enlarge:

GBPUSD Daily Chart, 03/05/15

GBPUSD Daily Chart, 03/05/15

GBPUSD may have found support as highlighted in the above chart, which may yield corrective gains within the next several days ahead of Thursday where the UK elections will be held. Our prior concern is that the price could very well retrace towards 1.4980 before climbing higher.

The debate is whether the current support will indeed hold as expected. The 55-Daily Moving Average (DMA, in purple) may contain any attempts to violate the support line but may not justify executing a long trade at market price.

There are multiple ways of approaching our bullish strategy in GBPUSD and we are bearing in mind the effects China HSBC Final Manufacturing PMI may have on the currency pair. A safe approach would be to enter at market price (when the markets open) and layer the protective stop below 1.4890. We are however reluctant to adopt a stop that exceeds +200 pips in GBPUSD it harms the RR.

The target for the trade would be 1.5605 and we are very conservative as moderate gains may be seen in GBPUSD. The protective stop and entry will be determined when the Forex market opens. Similar to CADJPY, you will be notified via email when a decision has been made.

7As we wrote earlier there are many approaches to this strategy. Our preference would be a gap lower that will minimize the stop’s size.

We highlight that the optimal conditions for GBPUSD would be a daily re-test of 1.4980 ahead of the UK elections but there are no firm indications this scenario will indeed materialize.

GBPUSD Trade Alert Details

Entry: long at market price (1.5138)
Take profit: 1.5605
Protective stop: 1.5022
Risk Ratio (RR): 1 : 3
Estimated duration: 10 days

We repeat that the trade details will be updated when the Forex market opens where you will be instantly notified via email.

UK Elections 2015

The elections are scheduled to take place on Thursday, 7 May, 2015. We have noted GBP enjoyed a hefty demand in the past week where one of polls showed the Conservatives are in the lead. We will therefore make an assumption that should the Conservatives win the elections GBP is likely to snap higher. This however will take place when the exit polls are released and not when the final results are published unless it is neck-to-neck as the latest polls suggest.

Here is the time table for the UK elections, 7 May, 2015:

06:00am GMT: The polling stations open and the voting begins

21:00 GMT: The voting ends

21:00 GMT: An exit poll is released as soon as the voting closes

22:00 GMT (approx.): The first official results are published from one of the constituencies.

04:15am GMT (approx.): Most of the official results should have already been released.

We will monitor the UK elections results throughout the night on Thursday into the early hours of Friday morning. In an event where the exit polls fail to show a decisive winner we may consider updating you in real time throughout the night as the official count is released.

05/05/15 UPDATE: GBPUSD enjoyed moderate gains in today’s session as anticipated.

GBPUSD Daily Chart

Please click on the chart to enlarge:

GBPUSD Daily Chart, 05/05/15

GBPUSD Daily Chart, 05/05/15

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

06/05/15 UPDATE: GBPUSD is trading at 1.5241 at the time of this writing following the ADP, almost +100 pips profit. We are closing 20% of the long trade at market price.

06/05/15 UPDATE II: GBPUSD spiked to 1.5258 at the time of this writing. As we have gained a sufficient distance from the market we are shifting the protective stop to the entry.

07/05/15 UPDATE: CADJPY is trading at 98.28 at the time of this writing.

CADJPY 4hr Chart, 7 May, 2015

Please click on the chat to enlarge:

CADJPY 4hr chart, 07/05/15

CADJPY 4hr chart, 07/05/15

Although we are expecting further weakness in the currency pair we are closing 10% of the short trade at market price.

07/05/15 UPDATE: GBPUSD spiked higher from the exit polls that showed the Conservatives are in the lead, as anticipated.

GBPUSD Daily Chart, 7 May 2015

Please click on the chart to enlarge:

GBPUSD Daily Chart, 07/05/15

GBPUSD Daily Chart, 07/05/15

We are closing 20% of the long trade at market price and shift the protective stop to 1.5200 ahead of the US Non-Farm Payrolls (NFP).

08/05/15 UPDATE: GBPUSD is trading at 1.5414 at the time of this writing. We are shifting the protective stop to 1.5300 and close 10% of the long trade at market price.

11/05/15 UPDATE: GBPUSD is trading at 1.5531 at the time of this writing. We have decided to close the long trade at market price.

GBPUSD Daily Chart 11 May 2015

Please click on the chart to enlarge:

GBPUSD Daily Chart, 11/05/15

GBPUSD Daily Chart, 11/05/15

We have ended GBPUSD trade with a decent profit. CADJPY short trade is still open, trading at 99.21 at the time of this writing.

19/05/15 UPDATE: CADJPY is trading at 98.57 at the time of this writing. We note the possibility for top H&S on the daily chart, which could mean the daily support at 98.37 may hold on the first test. Although this is a monthly entry we choose to close 10% of the short trade at market price.

05/06/15 UPDATE: CADJPY triggered the protective stop loss order following the Canadian Employment data. The losses were soaked by our short trade in EURTRY.

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Last Updated on February 7, 2021