Bullish Hammer On GBP/USD Candles

The euro edged higher on Monday after a short-lived sell-off tied to Italy's inconclusive weekend election, helped by the creation of a coalition government in Germany that eased political uncertainty there.

The two winners of the general election in Italy were the Five Star Movement (M5S), which secured over 30% of the vote, and the right-wing League, which emerged as the largest party within the center-right coalition. The center right is the leading bloc, with about 37% of the vote, although this will probably not be enough to win an absolute majority of seats in both houses of parliament. The center-left performed worse than polls had suggested, while to the left of the Democratic Party, Free and Equal was in disarray, barely making it into parliament. The center right is likely to be given the mandate to try to form a government. However, the prominent position of the League might complicate the center-right's job of extend its parliamentary support, while a potential alliance between the M5S and the League, which is numerically possible, remains politically difficult. Therefore, uncertainty is likely to prevail over the coming weeks.

In Germany, 66% of the participating SPD members approved the grand coalition treaty yesterday. The so-called chancellor vote in the Bundestag and the swearing-in of the ministers will take place on 14 March. In order to become chancellor again, Angela Merkel needs the majority of all members of parliament, regardless of whether they participate in the vote or not. Despite some dissenters, Merkel’s reelection is likely. The CDU/CSU and the SPD together have 399 seats out of the 709 (56%) in the Bundestag.

This is what our forex trading strategies look like:

EUR/USD

Trading strategy: Long

Open: 1.2330

Target: 1.2580

Stop-loss: 1.2210

Recommended size: 1.67 mini lots per $10,000 in your account

Short analysis: The EUR/USD temporarily fell below 7-day EMA today, but is going to close above that level at the end of the day. A close above the 30-dma at 1.2350 would be another bullish signal. Our bid at 1.2330 was filled and we target 1.2580 now.

Previous position: Short opened at 1.2300, profit taken at 1.2180, earned: 120 pips, $328 per $10,000 in your account

GBP/USD

Trading strategy: Long

Open: 1.3780

Target: 1.4100

Stop-loss: 1.3640

Recommended size: 1.07 mini lots per $10,000 in your account

Short analysis: A failure to break the cloud on Thursday brought a squeeze into the close and hammer on the candles. The hammer was confirmed on Friday with a bull close above the 55-day SMA. We opened long at 1.3780. The target is 1.4100.

Previous position: Short opened at 1.3930. Profit taken at 1.3770, earned: 160 pips, $301 per $10,000 in your account

USD/JPY

Trading strategy: Sell

Open: 106.50

Target: -

Stop-loss: 107.50

Recommended size: 1.58 mini lots per $10,000 in your account

Short analysis: USD/JPY scope is growing for a recovery back above 106.00. We are looking to get short on recovery which could be capped by the 106.48 Fibonacci level, 23.6% retrace of ther 110.48 to 105.24 fall. 14-day momentum remains negatvice, so near-term gains should be viewed as corrective.

Previous position: Short opened at 107.80. Profit taken at 107.40, earned: 40 pips, $53 per $10,000 in your account

USD/CAD

Trading strategy: Await signals

Short analysis: The USD/CAD broke above the December 19 high of 1.2920 and is testing a psychological barrier at 1.3000 now. U.S. President Donald Trump is expected to finalize the tariffs – 25% on steel and 10% on aluminum - later in the week, posing a tough challenge for U.S. Trade Representative Robert Lighthizer, Canada's Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo.  He appeared to tie possible exemptions for the United States' two neighbors to a "new" NAFTA deal as well as other steps. Our short position was closed with a loss. We will wait for stronger signals before putting a new position.

Previous position: Short opened at 1.2820. Stop-loss hit at 1.2930, lost: 110 pips, $150 per $10,000 in your account

AUD/USD

Trading strategy: Short

Open: 0.7845

Target: 0.7740

Stop-loss: lowered to 0.7785

Recommended size: 3.00 mini lots per $10,000 in your account

Short analysis: Our short remains but it is struggling. Dips below 61.8% Fibonacci of 0.7501-0.8136 rise are short lived. Monthly RSI is biased down, which gives some hope to our bearish trade. The position is already risk free with stop-loss lowered to 0.7785.

Previous position: Long opened at 0.7785. Profit taken at 0.7800, earned: 15 pips, $24 per $10,000 in your account

EUR/GBP

Trading strategy: Buy

Open: 0.8880

Stop-loss: 0.8815

Recommended size: 1.12 mini lots per $10,000 in your account

Short analysis: We saw a pullback today, but our bid has not been filled. We keep our bid unchanged as some volatility is likely this week and another dip cannot be excluded.

Previous position: Short opened at 0.8790. Stop-loss hit 0.8830, lost: 40 pips, -$100 pips per $10,000 in your account