The Weekly Update: UK Terror Attack Aftermath

UK Terror Attack

Over the weekend a terror attack took place in London, claiming the lives of 7 individuals. The polls that were released over the weekend showed the gap between the Conservatives and Labour is narrowing further, however, the terror attack may have a significant impact on the UK elections.

In our opinion this plays well into Theresa May’s party despite the criticism she has downgraded the threat level to ‘critical’ from ‘severe’ prior to the attack. The elections are now not only about the brexit negotiation with the European Union (EU).

The elections polls within the next several days may trigger some volatility in GBP pairs and crosses and provide greater clarity as traders would like to know if the terror attack has shifted voters from one camp to the other.

At the time of this writing GBP pairs and crosses are expected to gap lower at the opening of the Foreign Exchange (Forex) market. Uncertainty does tend to trigger risk aversion mode in global markets, however, we have noted the Swiss Franc (CHF) has positioned itself for some weakness against a basket of currencies. We are remain cautious with the technical signal we derived from the chart.

CHF Trading Strategy

Before we outline our strategy we have similar entries in EURCHF and CADCHF, which is why our assumption AUDCHF gains may stem due to a weak CHF rather than a strong Aussie.

From a fundamental angle weak Swiss Franc is not aligned with the UK terror attack. CHF tends to benefit from safe-haven flows in the FX markets. If we will witness a weak CHF it may be due to 2 possible scenarios. The weekend terror attack will not be deemed as a risk aversion event and will be limited to GBP (if at all), possibly even the FTSE100. The second scenario, is an intervention by the Swiss National Bank (SNB).

We cannot determine whether there will be a heavy intervention by the SNB this week so our assumption is that the first scenario is more likely to take place. With that said, we must also consider the possibility this may be a false signal.

AUDCHF Daily Chart

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The Weekly Update: UK Terror Attack Aftermath

AUDCHF Daily Chart 04/06/17

CADCHF 4hr Chart

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The Weekly Update: UK Terror Attack Aftermath

CADCHF 4hr Chart 04/06/17

We are not listing EURCHF as we would like to avoid the Euro for the time being. The difference between AUDCHF and CADCHF are the time frames. AUDCHF is a trade we may carry into the Reserve Bank of Australia (RBA) monetary policy that is due at the beginning of the week. CADCHF is a 4hr entry, which means we are expecting some gains to materialize within the next 24 hours.

Should CADCHF fail to correct higher it may trigger the protective stop, which will be relatively tight as it is a 4hr chart. Daily entries that are derived via technical analysis tend to be firmer than 4hr entries on most occasions. What we have to determine once the market opens is whether it may be a false signal, which if is the case we may opt for CADCHF simply due to the required stop loss order.

We will issue an update within 40 minutes after the opening of the FX markets.

AUDCHF Trade Alert

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The Weekly Update: UK Terror Attack Aftermath

AUDCHF Daily Chart II 04/06/17

AUDCHF long at market price (0.7152)
Take profit: 0.7280
Protective stop: 0.7095
Risk Ratio (RR): 1 : 2.0 (approx.)
Estimated duration: 5 days

Note: Not the best risk ratio but we must ensure we have a sufficient distance from the market as the spread tends to widen particularly in CHF pairs and crosses.

05/06/17 UPDATE: AUDCHF is trading at 0.7208 at the time of this writing.

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The Weekly Update: UK Terror Attack Aftermath

AUDCHF Daily Chart 05/06/17

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

05/06/17 UPDATE II: There is still more room for AUDCHF to correct higher, possibly due to the RBA monetary policy. The difficulty with holding the trade is that it is a daily entry, we cannot shift the stop above the entry despite the strong gains that took place in today’s decision.

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The Weekly Update: UK Terror Attack Aftermath

AUDCHF Daily Chart II 05/06/17

We are closing AUDCHF long trade at market price (0.7222).

GBPCHF Trade Alert

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The Weekly Update: UK Terror Attack Aftermath

GBPCHF 4hr Chart 05/06/17

GBPCHF long at market price (1.2450)
Take profit: 1.2820
Protective stop: 1.2365
Risk Ratio (RR): 1 : 4.4 (approx.)
Estimated duration: 4 days

Note: We are planning to tighten the protective stop after the daily close. It is slightly larger as CHF crosses’ spread tend to widen significantly at the rollover. Once the upper resistance (in blue) gives way it may pave the way for stronger gains in the cross (stop was later shifted to 1.2385).

GBPJPY Trade Alert

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The Weekly Update: UK Terror Attack Aftermath

GBPJPY 60min Chart 06/06/17

GBPJPY long at market price (140.98)
Take profit: 142.00
Protective stop: 140.63
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 24 hours

Note: Similar to GBPCHF, we are taking a risk initiating a long trade but due to the tight stop we decided to opt for GBPJPY.

06/06/17 UPDATE: GBPJPY is trading at 141.18 at the time of this writing, we are closing 20% of the long trade at market price and shift the protective stop to 141.00. Do note his is an hourly entry, which is why the stop is already shifted.

06/06/17 UPDATE II: GBPJPY triggered the protective stop at 141.00, we are not re-entering the trade.

07/06/17 UPDATE: GBPCHF is trading at 1.2482 at the time of this writing, we are closing 20% of the long trade at market price and shift the protective stop to 1.2410.

EURGBP Trade Alert

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The Weekly Update: UK Terror Attack Aftermath

EURGBP 4hr Chart 07/06/17

The dip in GBP provided us with an entry. From a technical angle it is a decent entry, from a fundamental angle it means we would also be targeting the ECB monetary policy. This is a 4hr enry.

EURGBP short at market price (0.8707)
Take profit: 0.8530
Protective stop: 0.8775
Risk Ratio (RR): 1 : 2.4 (approx.)
Estimated duration: 2 days

08/06/17 UPDATE: GBPCHF is trading at 12517 at the time of this writing, we are closing 20% of the long trade at market price and shift the protective stop to the entry. EURGBP is trading at 0.8677 at the time of this writing, we are closing 30% of the short trade at market price and shift the protective stop to 0.8712.

07/06/17 UPDATE: GBPCHF is trading at 1.2482 at the time of this writing.

The Weekly Update: UK Terror Attack Aftermath

GBPCHF 4hr Chart 07/06/17

We are closing 20% of the long trade at market price and shift the protective stop to 1.2410.

08/06/17 UPDATE: GBPCHF is trading at 12517 at the time of this writing.

Please click on the chart to enlarge:

The Weekly Update: UK Terror Attack Aftermath

GBPCHF 4hr Chart 08/06/17

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

08/06/17 UPDATE II: EURGBP is trading at 0.8677 at the time of this writing.

Please click on the chart to enlarge:

The Weekly Update: UK Terror Attack Aftermath

EURGBP 4hr Chart 08/06/17

We are closing 30% of the short trade at market price and shift the protective stop to 0.8712.

08/06/17 UPDATE III: EURGBP is trading at 0.8663 at the time of this writing.

The Weekly Update: UK Terror Attack Aftermath

EURGBP 4hr Chart II 08/06/17

We are closing 10% of the short trade at market price.

08/06/17 UPDATE IV: GBPCHF is trading at 1.2523 at the time of this writing, we are closing the long trade at market price. We do not have a sufficient distance from the market and require to widen the stop, which we are reluctant to do.

08/06/17 UPDATE V: The exit polls showed the Conservatives are likely to fall short of majority, which forced EURGBP to gap higher following the daily close. We were aware 0.8655 was tested minutes prior to the daily close (which we market on the chart as a potential support level).

There was still a fair possibility the support may give way, which was not the case. As we downsized EURGBP short position the loss was muted and soaked by GBPCHF long position. We also considered the possibility EURGBP may gap higher, which is why our risk management measures were appropriate.

The Weekly Update: UK Terror Attack Aftermath
As all trades are closed this page can now be accessed by all traders. Open trades and relevant intraday strategies are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
The Weekly Update: UK Terror Attack Aftermath

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