The Weekly Update: The Week of the Aussie

Market Recap

Most of the volatility we have seen in the past week was triggered by outside market events. Following the heavy selling that spread across the stock markets the US attempted to cushion the selling by expressing their content with a firm US Dollar.

The main pressure on EURUSD was triggered by remarks from one of the ECB members that the US has intentionally weakened the US Dollar. Economic figures were fairly irrelevant.

The selling in global indices was exaggerated by algorithms although we should say that is not a new phenomena. When the White House’s twitter account was hacked several years ago and a false tweet was posted the market reaction was also influenced by similar algorithms.

The damage however may have already been done. Aside the FTSE100 (at the time of this writing), the US and other European indices are positioned for fairly heavy selling some time in 2018. We still require the monthly close to affirm this is the case.

We cannot determine whether the selling (one affirmed) may be as a result of rate hikes by the Fed or a risk aversion event at the time of this writing. We will have to re-assess the leading indices time in March.

The upcoming risk events in the market are the general elections in Italy (1 March, 2018), SPD members vote on the final coalition deal and new governors in the Fed and the RBNZ.

For the upcoming week the most significant figures are inflationary data. The US Consumer Price Index (CPI) is due prior to the Producer Price Index (PPI) as opposed to what we have seen in recent months. US inflation is tied to the pace of future rate hikes from the Fed. As most of the volatility we have seen was triggered by the US administration, the US CPI may trigger some volatility.

The UK CPI is also due this week, similar to the US CPI, should the CPI come in above 3.00% it may place the BOE under pressure to hike rates, which may in turn lift GBP higher.

AUDJPY Signal Strategy

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The Weekly Update: The Week of the Aussie

AUDJPY Weekly Chart 11/02/18

We often do not attempt to long any currency pairs that are inside a price range. We do have some indications for AUD strength. We did attempt to long AUDCHF via a buy limit order, however, the market had 24 hours to trigger the entry, which was unsuccessful.

Although we marked the diagonal support (in blue) it is irrelevant. The price range is between 84.40 – 89.45. The price may re-test 84.40 and possibly even as low as 83.90 before correcting higher. We highlight that these re-tests are not guaranteed to materialize but must be anticipated.

There is a fair possibility the firmer gains may only begin next week. A gap lower in AUDJPY may increase the odds for the gains to begin this week. The reason why we chose not to wait for next Sunday is because there is no guarantee the gains will not commence this week.

EURUSD Update

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The Weekly Update: The Week of the Aussie

EURUSD Weekly Chart 11/02/18

As we updated last week we may see some gains in EURUSD. We can layer a sell limit order at a higher price, however, we would first like to see how the trend develops. Euro Dollar may correct to 1.2500 if not slightly higher. We highlight that there is no guarntee these corrective gains will materialize. Only in an event they do we may have the ability to re-enter EURUSD.

AUDJPY Trade Alert

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The Weekly Update: The Week of the Aussie

AUDJPY Weekly Chart II 11/02/18

AUDJPY long at market price (ask 85.10)
Take profit: 89.10
Protective stop: 83.30
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 30 days (approx.)

Relevant as long as the price is below 85.65

Note: The potential drawdown is a re-test of 83.90 but 84.40 may hold if tested. There is a fair chance there may be some limited drawdown this week as noted in the weekly update, however, we cannot fully conclude whether the re-tests will indeed materialize. We therefore chose to absorb the potential drawdown.

The Australian employment data is due later this week.

EURUSD US CPI Strategy

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The Weekly Update: The Week of the Aussie

EURUSD Daily Chart 13/02/18

13/02/18 UPDATE: EURUSD may have painted top Head-And-Shoulders (H&S) on the daily chart. We are crossing EURUSD daily chart with EURUSD and USDCHF weekly charts. It is challenging to determine whether the price will not attempt to re-test 1.2515.

Initiating the trade at market price requires the protective stop to be layered above 1.2515, which we find fairly high. We can attempt a tighter stop but we are unlikely to withstand the spike higher should it be the outcome of the US CPI.

There are technical foundations that suggest the price may re-test 1.2515 but it is inconclusive. We are likely to opt for a sell limit order, should EURUSD weakness begin tomorrow we will cancel the order and dismiss the entry. We will make a final decision after the daily close.

13/02/18 UPDATE: We decided to layer a sell limit order in EURUSD.

EURUSD short at 1.2495 (sell limit order)
Take profit: 1.2080
Protective stop: 1.2615
Risk Ratio (RR): 1 : 3.45 (approx.)
Estimated duration once triggered: 10 days (approx.)

EURUSD Trade Alert

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The Weekly Update: The Week of the Aussie

EURUSD Weekly Chart 14/02/18

We are cancelling EURUSD sell limit order and initiate the trade at market price.

EURUSD short at market price (bid 1.2448)
Take profit: 1.2080
Protective stop: 1.2615
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 14 days (approx.)

Relevant as long as the price is above 1.2375

Note: The potential drawdown is a re-test of 1.2515 (possibly a brief show above).

13/02/18 UPDATE II: We are shifting AUDJPY protective stop to 83.13.

USDJPY Entry Order

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The Weekly Update: The Week of the Aussie

USDJPY Daily Chart 18/02/18

USDJPY long at 105.78 (buy limit order)
Take profit: 108.00
Protective stop: 104.95
Risk Ratio (RR): 1 : 2.7 (approx.)
Estimated duration once triggered: 10 days (approx.)

Note: The potential drawdown is a re-test of 105.50. The market has approximately 24 hours to trigger the order.

19/02/18 UPDATE: We are cancelling USDJPY buy limit order as it failed to trigger the order.

20/02/18 UPDATE: EURUSD is trading at 1.2339 (ask) at the time of this writing.

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The Weekly Update: The Week of the Aussie

EURUSD Weekly Chart 22/02/18

We are closing 20% of the short trade at market price. Do note the screenshot of EURUSD weekly chart that was taken on 20/02/18 was deleted by error. We are presenting a screenshot from 22/02/18.

22/02/18 UPDATE: We are shifting EURUSD protective stop to 1.2456.

Last Updated on February 25, 2018