Weekly Strategies: The Trend Has Been Set for December

Despite the recent gains in global indices and the heavy XAU/USD (gold) selling risk aversion is expected to resurface. We are aware a significant earthquake struck New Zealand (7.8 magnitude) which may lead to a gap in all NZD pairs and crosses. We were anticipating NZD weakness in the market but were unable to fully capitalize on move in EURNZD. Attempting a new trade in NZD is no longer possible without taking substantial risks. As we updated are subscribers we have noted a potential entry in EURJPY. We are not anticipating the earthquake in New Zealand to have a substantial impact on JPY, however, we will have to wait for the opening of the market to ensure this is the case.

EURJPY Weekly Chart

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The key resistance is at 116.50. We refrained from initiating the short trade at the end of last week as we were concerned Euro yen could make a show above 116.50 before reversing lower at the weekly close. As EURNZD is expected to gap higher following the earthquake in New Zealand it may spill over to other EUR pairs and crosses. A gap higher will reduce the size of the stop and increase the potential take profit. The New Zealand Dollar (NZD) is likely to be the currency that is most affected in the Forex market. A break below the lower support line in EURJPY may pave the way for further weakness in the currency pair. EURJPY has approximately 14 days to begin its downtrend. If no weakness is reflected within the next 14 days we may have to exit or substantially reduce the trade size.

GBPJPY Weekly Chart

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We will begin by stating GBP gains do not appear to be over at the time of this writing. GBP may continue trading higher against a basket of currencies although we are viewing the potential gains as corrective rather than a significant reversal. GBPJPY will require an entry order unless the cross gaps higher at the opening of the market. Initiating a short trade in GBPJPY at current levels (assuming no gap will take place) requires a hefty stop. We are beginning to question the possibility for a rate hike in December by the Fed as the charts do not support a strong US Dollar in the medium-term, however, we must wait for monthly close in order to re-affirm USD is due weakness.

There can be numerous possibilities for a strong yen. We are aware Japan GDP is due to be released during the Asian session but the most likely scenario is risk aversion. The indices are still positioned for further weakness despite the corrective gains.

Dow Jones 30 Monthly Chart

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Gold Monthly Chart

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Both the Dow and XAU/USD (gold) provide a technical monthly entry. However, we are not at the end of the month. Initiating the trades at current levels leaves us prone to spikes where the price and trade substantially above the high in Dow (for example) and then give up all its gains at the end of the month, painting a spike on the monthly chart. As JPY is not providing an entry in all JPY pairs and crosses, there is a mild possibility the Fed will not hike in December or hike rates with a warning that no further hikes will take place for some time. The alternative scenario is a rat hike but due to the pricing-in it may weigh on the US Dollar and global equities due to profit-taking. We can only obtain a better understanding in December. There is an element of risk trading on the monthly chart prior to the monthly close, we will decide how to proceed with the signals after the market opens.

GBPJPY Entry Order (Sell Limit)

GBPJPY sell limit at 135.80
Take profit: 129.10
Protective stop: 137.50
Risk Ratio (RR): 1 : 5 (approx.)
Estimated duration: 30 days

Note: GBPJPY has until the end of the week to trigger the entry order.

EURJPY Trade Alert

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EURJPY short at market price (115.74)
Take profit: 111.80
Protective stop: 117.67
Risk Ratio (RR): 1 : 2 (approx.)
Estimated duration: 30 days

Note: The price may re-test 116.50 as it was not seen on Friday. If within 14 days the downtrend fails to materialize we may exit the trade or substantially liquidate the position.

DJ30 Trade Alert

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DJ30 short at market price (18,859)
Take profit: 18,310
Protective stop: 19,040
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 14 days

Note: We are basing the trade on the monthly chart. It is a risk as we  have time to the monthly close but it is a risk we are willing to take.

14/11/16 UPDATE:  We are modifying GBPJPY entry price from 135.80 to 136.65. The protective stop is changed from 137.50 to 138.25. The take profit remains the same.

15/11/16 UPDATE: We have decided to cancel GBPJPY entry order. We were anticipating a spike in GBPJPY but the entry was missed, An entry order is not longer required. We will consider a short trade when an entry is available at the daily close. The spike was triggered by reports the brexit may be delayed by up to 2 years. The +80 pips missed our entry by approximately +10 pips before reversing -95 pips at the time of this writing.

USDJPY reached a strong resistance level, we are fairly surprised that level was tested. Although it may suggest EURJPY may correct lower we are closing 30% of the short trade at market price (116.96). This is done to minimize our market exposure.

EURUSD Trade Alert

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EURUSD has provided an entry on the daily chart with a fairly tight stop.

EURUSD long at 1.0721
Take profit: 1.0920
Protective stop: 1.0660
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 7 days

16/11/16 UPDATE: We were expecting both EURJPY and USDJPY to retrace lower, which would have lifted EURUSD higher in light of the current market conditions and triggered further selling in the Dow. This did not take place in today’s session. EURUSD is still trading the protective stop at the time of this writing. We have decided to widen EURUSD stop to 1.0654. This is +6 pips increase. We will not widen the stop again. This was a tough decision as we generally do not widen stops.

EURCHF Trade Alert

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EURCHF is positioned for a daily reversal. We are keen on shorting EURCHF when the opportunity arises as we expect the SNB to re-apply the floor in EURCHF. The spike that was triggered at the brexit suggests the required stop exceeds +100 pips, which we find excessively large for the entry. We are using a tighter stop for the long trade.

EURCHF long at market price (1.0710)
Take profit: 1.0850
Protective stop: 1.0665
Risk Ratio (RR): 1 : 4 (approx.)
Estimated duration: 8 days

22/11/16 UPDATE: EURCHF is trading at 1.0744 at the time of this writing, we are closing 20% of the long trade at market price. We will be shifting the stop to the entry after the daily close in EURCHF.

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The stop was shifted to the entry after the daily close.

NZDCHF Trade Alert

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NZDCHF long at market price (0.7118)
Take profit: 0.7238
Protective stop: 0.7073
Risk Ratio (RR): 1 : 3 (approx.)

24/11/16 UPDATE: Our trades in EURUSD, EURJPY and DJ30 triggered the protective stop loss order. We did not re-enter the market. EURJPY rally was triggered when the BOJ carried an operation to to curb the yield curve as part of its monetary easing program.

28/11/16 UPDATE: NZDCHF is trading at 0.7168 at the time of this writing.

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We are closing 30% of the long trade at market price and shift the protective stop to 0.7115.

EURUSD Trade Alert

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EURUSD long at market price (1.0567)
Take profit: 1.0890
Protective stop: 1.0505
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 7 days

Note: This is a re-entry based on the 4hr chart that is inline with the monthly chart. There is an element of risk initiating this trade prior to the monthly close but intraday time frames support the long entry.

28/11/16 UPDATE: EURUSD is trading at 1.0612 at the time of this writing.

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We are shifting the protective stop to 1.0574 and close 20% of the long trade at market price.

28/11/16 UPDATE II: NZDCHF is trading at 0.7160 at the time of this writing. We are closing 10% of the long trade at market price. We may shift the protective stop after the daily close once the spread stabilizes (the stop was later shifted to the entry.

28/11/16 UPDATE III: EURCHF is trading at 1.0752 at the time of this writing, we are closing 10% of the long trade at market price.

29/11/16 UPDATE: EURUSD triggered the protective stop that was shifted above the entry, ending the trade with a minor profit.

29/11/16 UPDATE II: NZDCHF is trading at 0.7211 at the time of this writing.

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We decide to close the long trade at market price. We are aware the price later triggered the take profit but we had to exit as the 4hr close was at an intraday resistance level.

29/11/16 UPDATE III: EURCHF is trading at 1.0768 at the time of this writing.

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We are closing 10% of the long trade at market price and shift the protective stop to 1.0734.

CHFJPY Trade Alert

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CHFJPY short at market price (111.13)
Take profit: 106.75
Protective stop: 112.25
Risk Ratio (RR): 1 : 4 (approx.)
Estimated duration: 15 days

Note: The only reason we are opting for this trade is because of the daily and monthly chart. We can estimate the potential drawdown to be 80 pips. If the potentially 80 pips will take place it is likely to be tomorrow, the last day of the month. There is no guarantee such a retracement will take place.

30/11/16 UPDATE: EURCHF is trading at 1.0802 at the time of this writing.

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We decided to close the long trade at market price.

CHFJPY triggered the protective stop loss order ,ending the trade with a loss. The end of month fix was the main trigger for the rally in CHFJPY.

EURNZD Trade Alert

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EURNZD long at market price (1.4835)
Take profit: 1.5230
Protective stop: 1.4705
Risk Ratio (RR): 1 : 4 (approx.)
Estimated duration: 7 days

Note: 1.4790 has been tested and is holding at the time of this writing. This is the same entry as our prior trade in EURNZD at the beginning of last month. This is a very tight stop for a cross that can easily trade over +200 pips per day. Renzi affirmed he will resign tomorrow. It will take us time to update the performance and the recent trade, you may refer to our prior trade in EURNZD until the trade is reflected on the website.

05/12/16 UPDATE: The Euro’s rally has been slightly stronger than we have anticipated. Strong gains may often lead to a correction. We generally do not issue updates at this hour but in light of the heavy EUR buying we decided to close EURNZD at market price (1.4994).

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The uptrend is intact at the time of this writing but the rally does make a strong case for a retracment that we are unwilling to absorb. It was a tough decision but we are closing the long trade.

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Last Updated on December 6, 2016