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Will Russia Take Actions? Ask EURCAD
In our prior weekly update we expected the Swiss Franc (CFH) to weaken against a basket of currencies and selected EURCHF as our pair in the Foreign Exchange market. Moderate weakness was noted in CHF across the board EURCHF failed to deliver substantial gains. We are in a modest profit in our long trade and see no reason to exit or downsize the trade at the time of this writing.
Although the upcoming event is not receiving much attraction, the EU foreign ministers are due to meet tomorrow to discuss further sanctions on Russia. It is important to highlight the majority of Europe is depending on Russia’s natural gas. To make it even worse, the accumulated debt of Russia exceeds $700 billion, mostly to European banks. If further sanctions are imposed, Russia could suspend its debt payments, which will create a bearish whirlpool in global markets. Justice Vs. Capitalism in its purest form. We are already observing multiple stocks from the banking sector but we are waiting for the monthly close. We are nevertheless expect moderate weakness in the Canadian Dollar (CAD) and the New Zealand Dollar (NZD).
From a technical angle it does appear risk aversion may dominate the market, possibly due to outcome of the EU foreign ministers actions or Russian threats to retaliate against the sanctions. However, when we observed Gold (XAU/USD) it appears any gains in the yellow metal will not affirm an established uptrend. Our forecast is one massive jolt in global markets that is likely to be fully corrected as we will reach the end of the week.
EURCAD Technical Analysis
EURCAD has painted reversed Head-And-Shoulders (H&S) that we are fairly content to establish a long entry. Our target is fairly conservative as we are uncertain if the FX cross will truly break above the neckline at 1.4660.
EURCAD Daily Chart
Click on the chart to enlarge:
We are setting our protective stop at 1.4460, targeting 1.4660. We will not hesitate to exercise multiple intraday time frames to readjust the protective stop loss order when we find it relevant. Do follow this analysis as updates will be posted at the bottom.
Gold Technical Analysis
We are counting on safe haven flows to trigger a substantial bullish spike in gold. We exercised our technical models on the 4hr chart and have a fair entry at market price. Reversed H&S where our target is set below the neckline.
Gold 4hr Chart
Click on the chart to enlarge:
We do not expect a long-term uptrend in gold at this stage but merely to capitalize of a temporary rally. We are taking extreme caution this week as we cannot ignore the market fundamentals but rely on our technical models to determine our entries. The target for gold is set at 1323, protective stop at 1,306.50.
Key Economic Figure
Aside the EU meeting this week is enriched with economic data. The key release is the Reserve Bank of New Zealand (RBNZ) monetary policy, due this Wednesday. We are monitoring EURNZD as there is a fair potential for strong gains at the time of this writing but we seek an intraday entry, which we do not have at the time of this writing.
22/07/14 UPDATE: We were stopped out on our long XAU/USD trade. We have placed a conservative stop as we feared the volatility in today’s session. Heavy selling forced EURCAD to 1.4480 but our bullish outlook has not been negated as firm support is noted at 1.4475. We have updated the trades into our ‘Trades Performance.
22/07/14 UPDATE II: We were concerned on today’s volatility and we were correct indeed. Violent reaction noted across the FX board following the US data. Our long EURCAD trade is holding as the price hovers near our protective stop loss order at the time of this writing,
22/07/14 UPDATE III: EURCAD trade was stopped out in the US session. We will revise the market to determine our entries. Open trades are available in ‘Trades Performance.’
Trade alerts are also issued in the weekly update.