Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
The chaos in the Forex market continues this week. While there is vast uncertainty on all fronts amid the coronavirus at the moment, one thing seems to be going on a one-way street.
The sudden breakdown of OPEC talks between Russia and Saudi Arabia caused a sharp decline in Oil prices over the weekend that is unlikely to see a recovery any time soon. In fact, Oil prices are now expected to dip below the $30 level and stay there for the foreseeable future as Russia and Saudi Arabia announced a price war.
Canadian Dollar Suffers On Oil Price Slump
Naturally, among the major currencies, the Canadian Dollar suffered the most due to the huge part oil revenues play in Canada’s economy. USDCAD is now up more than 300 pips from Friday’s close, and this uptrend is likely to continue higher toward the 1.40 area.
With that said, we should be looking to sell the Canadian Dollar versus other currencies that are best positioned to gain at the moment. And given the overall risk-off environment, the Japanese Yen seems set to remain strong, especially if stock markets remain weak or continue to tumble.
Thus, turning to the CADJPY pair, we can see a steep downtrend in the past couple of weeks. The sharp decline in oil prices is likely to trigger further rate cuts from the Bank of Canada (their rates currently standing at 1.25% provide ample room for cutting), which will likely hit the Canadian Dollar additionally. If Oil prices plunge below $30 and the Bank of Canada cuts rates again (both looking very likely), USDCAD should be headed way above 1.40. CADJPY
will have room to fall toward the 70.00 area and possibly revisit the 68.00 lows from 2009.
CADJPY Technicals 4H Chart - Potential Sell Trade
CADJPY bounced strongly yesterday, but this is likely due to technical reasons only - such as oversold levels. This rally can provide excellent levels to join the ride.
The GMMA trend indicator (see chart) shows that the retracement has started but may have some more room to run. Another bullish attempt above yesterday’s highs of 77.30 is possible. Such a development would also test the long-term GMMA band (blue lines on the chart). Selling around this GMMA area works well within strong trends, as is this one on CADJPY.
Picking specific target levels within a strong trend can be tricky, and it’s usually better to go with a trailing stop. Nonetheless, as a guideline, the next leg down in CADJPY has the potential to be 200 - 300 pips large or more.
Among else, the Parabolic SAR indicator can be used as a guiding tool for managing the trailing stop once the next bearish leg starts.
- Look to sell CADJPY on another bullish attempt of this retracement (toward the blue GMMA lines);
- Or on a bearish breakout of the current consolidation - in such a scenario the 4h Parabolic SAR would likely turn bearish also;
- the Parabolic SAR, so far, captured the bearish legs accurately during this ongoing downtrend (see chart)
Stop loss:
- Look to place the stop above the entry pattern (in 1st scenario);
- Use the Parabolic SAR as a stop-loss tool
Targets:
- 200 - 300 pips lower;
- use the Parabolic SAR as a trailing stop and protection against possible premature reversal of this trend
Note: stops may need to be relatively wider in this trade since volatility has surged in recent days compared to a few weeks ago. Position sizes should be adjusted accordingly.
Our trade signals from the past week
- March 04 – Short USDJPY from 107.30, target reached at 106.25 = +105 pips profit
TOTAL: +105 pips profit in the past week
TOTAL: +2975 pips profit since October 1, 2018
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Thank you!
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
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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