Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
Our trades on EURJPY and USDCAD from the past couple of weeks remain active, but are under threat of being stopped out (mainly due to the rising positive sentiment toward a US-China trade deal).
In this sense, EURJPY is under a higher risk of being stopped out than USDCAD, particularly if the US and China indeed sign a deal.
Fx Risk Update: US-China trade war at a pivotal point! (Again)
The outlook on the major currencies seems unclear broadly, either technically, fundamentally, or both.
The US-China trade war has reached a pivotal point (again). After the worsening of relations over the summer, hopes have risen in recent weeks that a deal will be done. However, as we noted before, investors have a hard time believing that any deal will be signed until they see it.
However, things are now different. With the next US Presidential election one year away, Trump has every reason to get a deal done and avoid further economic woes.
The increased chances for a trade truce have also taken the Chinese Yuan below the 7.00 level versus the Dollar (seen by investors as a crucial proxy for risk appetite and risk aversion). If the Yuan continues to strengthen, risky assets and currencies will probably extend the rally. That would mean pairs
like AUDUSD, NZDUSD, AUDJPY would move higher. Gold, on the other hand, could extend the decline.
Turning to the cross pairs for opportunities; NZDCAD looks most attractive.
In times of too many unknowns, and when things can turn either way (positive or negative), we are turning to the crosses where some shelter from direct trade war risks can be found. Hre, the NZDCAD pair may offer the best value at the moment.
Positive developments and progress on a US-China trade deal should generally support NZDCAD higher. This is because NZD is more sensitive to China developments than CAD. However, both currencies are closely linked to risk appetite, so that's why the immediate price reaction to any US-China news here is unlikely to be as big as on pairs such as AUDJPY or NZDJPY.
On a relative basis, NZD also looks more attractive, especially after the dovish turn by the Bank of Canada last week. Also, the NZD has been broadly falling for a while (as can be seen from the NZDCAD chart too), so the currency has reached quite cheap levels and may be ready for a rebound.
Technicals / Trading plan
NZDCAD has formed nice structures on the weekly timeframe, and the technicals are supportive of bullish NZDCAD price action from here. A nice-looking chart always pleases a chartist, and is something that is nice to have on your side when taking a trade.
Particularly, NZDCAD has been basing for the past 5 - 6 weeks, as can be seen from the chart below. The tall bullish engulfing candlestick that was formed last week is the third bullish candle pattern in a row over the past 5 - 6 weeks (the first two being the morning star and the hammer right before it).
Additionally, we can see that all this is happening near the support trendline of the descending channel. Thus, it's clear why the technicals are bullish on NZDCAD here.
By the same chart, the 0.8650 zone would be the first target to the upside (it is the 38.2% and 61.8% Fib confluence area). The second target would be toward the minor July highs and 50% Fib retracement in the 0.8750 - 0.8900 area.
Explore This Unique Offer
- Look to enter long as close as possible to the 0.8250 lows;
- Current levels near 0.8400 are also acceptable
- Only keep in mind that the Canadian employment report is due on Friday. This can cause large spikes either to the upside or the downside. If you prefer to wait it out, you could try to join the bullish move later from smaller timeframes if you miss the opportunity here.
Stop loss:
- Below the 0.8250 lows support; below the wider support area here would provide more breathing room for the trade
Target:
Note: Keep in mind, this is a longer-term trade idea that will probably need several weeks to reach the targets. Your position size and leverage should, therefore, be adjusted accordingly and decreased if/as needed.
Trade signals from the past weeks
- October 25, 2019 - Short EURJPY from 120.75 (still in progress)
- November 05, 2019 - Long USDCAD from 1.3160 (still in progress)
TOTAL: 0 pips in the past week
TOTAL: +1995 pips profit since October 1, 2018
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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