PCI Forex Technical Analysis June 20, 2014

By IFCMarkets

Good afternoon, dear investors. Today we traditionally consider examples of the PCI technology application for generating synthetic instruments: paired spreads, portfolios and composite instruments, such as portfolio spreads. We return to the trading against the currency portfolio. The instrument is attractive because it allows diversifying individual risks of each elementary instrument, as well as efficiently using the market signals that occur on the basis of the economic data related to the currency. Today we consider the CAD/[EUR+JPY+AUD] synthetic instrument. The instrument comprises three currency pairs (AUD, EUR and JPY) against which the Canadian Dollar is quoted. Each currency pair of the quoted part is selected with the equal weight of 33%. The given currency basket allows us to estimate the CAD significance regarding the most liquid money market instruments.

The choice of the market entry point is made on the basis of the fundamental analysis. For example, today at 14:30 (CET), we expect the publication of the Canadian Core CPI, as well as Core Retail Sales, CRS. The main intrigue remains in relation to the second indicator, as in contrast to the CPI, the CRS is predicted to change from 0.1% to 0.4%. The CRS is released by Statistics Canada every month and indicates the relative change in the retail sales volume of all the goods, except for cars which make up 20% of the total volume. The index measures the consumer confidence and investors’ optimism, respectively. We anticipate that if the actual value coincides with the forecast, or turns out to be overestimated, you can count on the CAD strengthening regarding the currency portfolio.

Here we consider the CAD/[EUR+JPY+AUD]:D1 synthetic composite instrument, composed in the NetTradeX trading platform. The price moves within the daily trend channel and shows the temporary consolidation (circled in red marker), which can have a significant momentum completion. The upper boundary intersection with the BollingerBands indicator is fixed with the simultaneous ParabolicSAR bullish turn. Thus, a high probability of the growth continuation, especially as the trend is confirmed by the RSI oscillator, as you can see on the chart.

Pending buy order is to be preliminary placed below the key fractal peak at 1.01129. This level is confirmed by the ParabolicSAR and the BollingerBands historical values. Stop Loss can be chosen at the last fractal minimum at 1.00286, which is also confirmed by both trend indicators. Opening a position, it is recommended to move the Stop loss after the parabolic values every day after the order execution. Thus, we can optimize the return/risk ratio in our favor in the process of changing market conditions.

Market Analysis provided by IFCMarkets