This is a very eventful week with several central banks meeting and of course we have NFP on Friday. After the political standoff in Spain, Carles Puigdemont was sacked and any secessionist ideas are strongly rejected by Madrid. Catalonia overwhelmingly voted for independence and even though there have been no comment from the EU about these recent development, the Euro should continue to slide as a remedy is discussed. For the past two years, politics have been a market driver and the sooner this is resolved, the faster this uncertainty will be eliminated. In Japan, Kuroda is widely expected to retain his BoJ seat and another round of Abenomics is expected to continue. The USD should also continue to gain ground and pare back losses after this year’s plunge. In the UK, we expect the BoE to raise their rates as inflation-at 3%-continue to erode purchasing power. Even though this rate hike is expected to be a one off thing, Carney’s interest rate forward guidance is important. Don’t also forget Brexit negotiations are ongoing and after periods of GBP depreciation, something needs to be done to normalize the Pound. Because of this, I expect the GBP to surge to pre-Brexit levels before the end of the year.
Today, I will short the Euro again as I look to take advantage of this across the board weakness. Though there is no sell signal in the monthly chart, there is a perfect evening star reversal and a bear divergence pattern in the daily chart. In fact, a gravestone doji was printed above the upper BB as the market closed on Friday. A stochastic sell signal is also in place meaning sell pressure should continue going forward. These combinations of technicals in the daily chart means chances of a drift lower towards that 4 months support trend line is high. Best case scenario is for it to be broken and that would mean economic benefit with positive swaps.
I will wait until a sell signal is printed in the 4HR chart before I short. Alternatively, set a sell limit around 16.55-16.70 with stop loss above last week’s highs at 16.9
Trade as follows:
Sell Limit: 16.55-16.70
Stop Loss: 16.9
Take Profit: 1:3-5 risk reward ratio
Have a successful trading day guys