The Weekly Update: USD Signals Against a Basket of Currencies

GBP and USD Analysis

The brexit negotiations will continue to make headlines throughout 2018. In our prior trading strategies for GBP we have discussed the possibility of a leg lower across GBP pairs and crosses before a resumption of the uptrend.

There are some indications GBP weakness may end but we must also be aware of thin market conditions. The recent GBP selling that took place on Friday were triggered by remarks from EU officials that the next phase of the brexit negotiations will be tougher.

The US tax bill is expected to be voted on this week. Slashing the cooperate tax to 21% has contributed to the rally we have seen across US indices, however, its impact on the Foreign Exchange (Forex) market has been fairly contained. The recent rate hike by the Fed will have an impact on the US Dollar, which we will have to assess at the beginning of 2018.

Based on the weekly close may have have long entries in GBPUSD and AUDUSD. We are also noting a potential short entry in USDCAD. GBPUSD is demanding over +100 pips stop due to the bearish spike (daily chart) that took place on 28 November.

As the protective stop in GBPUSD is higher than it should have been due to the spike we have 2 potential entries to consider.

AUDUSD Signal Strategy

One of the currency pairs we have a long entry in is AUDUSD. We are aware we were long EURAUD last week but nevertheless it is a potential entry.

AUDUSD Daily Chart

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The Weekly Update: USD Signals Against a Basket of Currencies

AUDUSD Daily Chart 17/12/17

AUDUSD is inline with the monthly we noted at November’s close and chose to dismiss as we do not wish to roll trades over Christmas. We were not planning to initiate any trades in AUDUSD but the daily chart has painted a fairly decent entry.

The recent dip following a daily close above 0.7627 may suggest further gains are in store.

USDCAD Signal Strategy

The second currency pair we found appealing for our strategy is USDCAD. We have also analyzed other CAD pairs and crosses and found USDCAD to be the most appropriate.

USDCAD Daily Chart

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The Weekly Update: USD Signals Against a Basket of Currencies

USDCAD Daily Chart 17/12/17

USDCAD daily chart demonstrates the range the currency pair is trapped in since the end of October. We are not keen on opting for such entries but the size of the range is approximately +250 pips. Based on other CAD pairs and crosses we are noting the potential for CAD strength, possibly due to the Consumer Price Index (CPI) on Thursday.

It does appear the US Dollar may weaken against a basket of currencies this week. We are leaning towards USDCAD but we will wait for the opening of the FX markets.

USDCAD Trade Alert

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The Weekly Update: USD Signals Against a Basket of Currencies

USDCAD Daily Chart II 17/11/17

USDCAD short at market price (bid 1.2866)
Take profit: 1.2626
Protective stop: 1.2975
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 5 days (approx.)

Price range: Relevant as long as USDCAD is above 1.2830

Note: The potential drawdown is a re-test of 1.2915.

It was a tough decision whether to opt for AUDUSD or USDCAD. As we do not wish to roll any trades over the upcoming weekend due to Christmas we decided to opt for USDCAD.

19/12/17 UPDATE: We are aware that due to USDCAD price range a bullish flag is developing on the hourly chart. Should the bullish flag kick into play we may decide to exit USDCAD.

19/12/17 UPDATE II:  USDCAD recent gains are as a result of the bullish flag on the hourly chart we mentioned earlier. The potential gains are over +100 pips. We tend to avoid hourly entries as they are very demanding and difficult to follow due to constant updates. There are very few hourly entries we accept.

We are closing USDCAD short position at market price (1.2889). There may some retracement to the the recent gains but our technical support for the trade is being dented by the market. It was a fairly close to call but we must also be aware of thin market conditions.

As opposed to USDCAD, Aussie Dollar was able to retain its gains in the market but we decided to favor USDCAD.

AUDJPY  Trade Alert

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The Weekly Update: USD Signals Against a Basket of Currencies

AUDJPY 4hr Chart 20/12/17

AUDJPY short at market price (bid 86.85)
Take profit: 86.00
Protective stop: 87.16
Risk Ratio (RR): 1 : 2.6 (approx.)
Estimated duration: 24 hours (approx.)

Price range: Relevant as long as AUDJPY is above 86.75

Note: The potential drawdown is minimal, the resistance level is seen at 86.87. We may shift the protective stop if we are too close to the market prior to the daily close.

21/12/17 UPDATE: AUDJPY rejected its lows on 2 occasions. EURAUD gains yesterday did not have an impact on AUDJPY. As the cross began correcting lower (EURAUD) it is lifting AUD higher. The BOJ had no impact on JPY pairs and crosses.

We are fairly close to the region of the protective stop at the time of this writing. We are not widening the stop, we will close AUDJPY trade today should the trade remain in the market by the daily close. The ECB fix as well as the US GDP figures are the next key events may be relevant to AUDJPY.

21/12/17 UPDATE II: AUDJPY triggered the protective stop several seconds prior to the data, we are not re-entering the market.