Hi again from the TIP team! We all know what an incredibly difficult market we are trading and last week many pro’s took losses. There are some confusing fundamentals to take into account and then technically we are dealing with choppiness and volatility. Last week’s focus was on Euro weakness and it surprised many with the strength of the rally. We were all watching the 1.10 level. In the event our order was filled and on Wednesday morning ahead of the FOMC we just were not comfortable with it so we took it off just a few pips on the wrong side. It turned out to be one of our two best decisions of the week.
The other was USDCAD which we added to our list, sold at 1.21661 and closed 1.20349, up 130 pips. We have mentioned this pair a few times in previous blogs and it was and is on our radar. By Wedensday we had decided to leave the euro for the rest of the week. We also added a limit short on the AUDNZD, on Wednesday at 1.5980 with a tight 50 pip stop and it filled in the evening and was stopped out when stops were pulled tight ahead of the rate decision in Australia. More of that in a moment.
The strategy this week was a bit different as we continue to see shifts in sentiment and try to manage the volatility. The full text of my analysis of the underlying fundamentals can be found here, Trading in choppy markets, and our decisions were all based on this perspective.
To the pairs;
As explained were are in this trade at the start of the week. .
We re-entered this at 1.0598, beginning an established resistance level currently in the red and heading back towards our entry. As the fundamentals are growing cloudier we may take this position off but we will watch the current behaviour to make that decision.
Three levels to watch. it really is a case of seeing how they behave before jumping in. The USDX looks to be in a place where it will attempt a move up although never make an assumption! It may be we will have to wait for a lower entry, especially if oil continues to rally which will see the USD under pressure.
The JPY may have to accommodate further, so looking for a long. Here are the levels; 119.61, 118.76 (bottom of the range) and 120.78 for a break and hold and to confirm the breakout of the triangle;
The EMAS have not been respected so we preferred the entry at 118.76 and this week’s trading has supported that decision.
Election fears and data have lent a downward bias to the GBP. The rally in oil and a more upbeat BOC has given the CAD a decent rally and some comparative strength. It was too close to the 200 EMA on Monday to short as the Risk/reward was insufficient. A return to 1.8400 would be a short and a break of the weekly trendline;
Looking to trade the range, this presents a short at 1.2380 with a 60 pip stop at 1.2370 using the value area low . We have placed a limit sell on this one.
This pair requires a close monitoring and understanding of both the USDX and the oil market.
We shall watch the other side of the range for a buy.
We opened a short half position on this pair on Monday. Trading recent even if temporary strength in the CAD and the current weakness in the NZD with dairy prices falling again and speculation of another rate cut. The technicals for this pair are the focus of the attached video.
As always these are ideas and not recommendations and should be used for practice purposes only!
remember that exercising discipline and risk control is the real key to dealing with these markets