Weekly Watchlist | Snapshot | 28 – 1 September 2017

This week we’re spending 30 seconds each on five markets that ooze potential. Here we go:

USDCAD

The double-bottom I highlighted last week on the Loonie is now coming into focus. Price has another 30 pips to 1.2430.

Trade idea: When price gets down to 1.2430, I’ll be looking for the buyers to step in. If we see a solid bounce on the daily chart, I will attempt to enter a long, targeting 1.2750 (some 300 pips away). I will also seriously consider a second position which I will attempt to hold until the 2017 highs back in May.

EURGBP

The wedge formation suggested that the buyers were running out of steam. Added to that, it’s very easy to fall into the gamblers fallacy or Monte Carlo fallacy whereby we believe that because a market has been going one way for a long time, it has to turn around. It doesn’t actually. It can do whatever it wants

The most famous example of the gambler’s fallacy occurred in a game of roulette at the Monte Carlo Casino on August 18, 1913, when the ball fell in black 26 times in a row. This was an extremely uncommon occurrence, although no more or less common than any of the other 67,108,863 sequences of 26 red or black. Gamblers lost millions of francs betting against black, reasoning incorrectly that the streak was causing an “imbalance” in the randomness of the wheel, and that it had to be followed by a long streak of red. (Wikipedia)

Trade idea: Hat’s off to the EURGBP for reminding us that the market can do whatever it wants.

GBPCAD

I like the idea of a short on the GBPCAD, selling into the long-term trend that is in play.

Trade idea: Where the horizontal resistance (1.6270) meets the downward sloping trend line would make for a lovely sell spot. Let’s let the retrace work its way out and see if we can get a sell all the way up there.

XAUUSD

Gold has been spectacular. Here is the play-by-play in case you missed last week’s commentary.

  1. We saw this pin-bar form, but my opinion was that the bulls and bears were tied two all and we needed more info before picking a direction.
  2. Price spent four days milling around, inside the body of the pin-bar. That’s a sign that the pin-bar would fail.
  3. Friday’s chaos around Jackson Hole saw price whip down, pick up a whole lot of buying and slam right up back up against resistance closing strong.

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    Gold wants to go higher.

    Trade idea: I’d like to see price trade above $1292 for a few days. Then, if shiny could drift down gently and retest that level as support, I’d be happy to go long.

    CADJPY

    The CADJPY appears to be printing an upward sloping channel (this is bearish).

    Trade idea: I’d like a breakdown of price below the channel, and a retest of the lower channel trend line before I short.

    Three of these things

    Three of these instruments share a common component: The Canadian Dollar. Clearly, the Loonie is playing a very big part in creating the setups, which means that we need to be cautious when taking these trades. We might have a higher than ideal correlation on the go here. The simple solution is just to pick the best one, and trade that, or split your risk across all three.

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