The Weekly Update: US Government Shutdown and USD

The US Government Shutdown

The Republicans failed to secure a sufficient majority on the US funding bill, which lead to a government shutdown. The move by the Democrats is politically driven as it was a temporary extension to February. One of the leading credit rating agencies announced that a government down will not affect the US credit rating.

Another vote is expected to take place on Monday at 06:00am GMT. Should the bill fail to garner enough votes the impact on the market may be greater. Based on the charts there is no evidence of a weak USD at the time of this writing.

The SPD Vote

The SPD delegates voted for formal negotiations with Angela Merkel’s party to form a grand coalition. The move garnered slim majority (around 56%). Another vote will take place on the final deal where approximately 430,000 SPD members will cast their vote, possibly within several months.

Aside the upcoming elections in Italy (due in March 2018) it is another reason for the European Central Bank (ECB) to remain on hold. There were conflicting remarks from ECB members regarding the Euro’s appreciation in the Foreign Exchange market, we assume it is a subject that will discussed in the upcoming ECB monetary policy on Thursday.

As we updated last week we noted several potential entries that suggest a firm USD.

EURUSD Daily Chart

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The Weekly Update: US Government Shutdown and USD

EURUSD Daily Chart 21/01/18

AUDUSD Daily Chart

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The Weekly Update: US Government Shutdown and USD

AUDUSD Daily Chart 21/01/18

GBPUSD Daily Chart

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The Weekly Update: US Government Shutdown and USD

GBPUSD Daily Chart 21/01/18

Signals Strategy

From a technical angle all the above potential entries are identical. This is not a long-term trend at the time of this writing but what appears to be temporary corrective gains. We are uncertain whether we wish to increase our exposure to the Euro.

We should highlight that many currency pairs and crosses are held in a range at the time of this writing. We are not expecting the price range to remain for a prolonged period of time.

GBPUSD Trade Alert

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The Weekly Update: US Government Shutdown and USD

GBPUSD Daily Chart II 21/01/18

We decided to opt for GBPUSD as we do not wish to increase our exposure to the Euro at the time of this writing.

GBPUSD short at market price (bid 1.3893)
Take profit: 1.3525
Protective stop: 1.4045
Risk Ratio (RR): 1 : 2.3 (approx.)
Estimated duration once triggered: 10 days (approx.)

Relevant as long as the price is above 1.3855

Note: The potential drawdown is a re-test of 1.3940. A daily close above 13940 may dent the entry. We have a sufficient distance to withstand a spike towards 1.4000.

24/01/18 UPDATE: GBPUSD triggered the protective stop following fairly strong gains, we are not re-entering the market.


AS THE OBJECTIVE OF THE STRATEGIES HAS BEEN MET THE ANALYSIS IS NOW ACCESSIBLE TO ALL TRADERS


The Weekly Update: US Government Shutdown and USD

The Weekly Update: US Government Shutdown and USD