As the Fed Chair outdid the ECB President in turning more dovish, the currencies haven't escaped the monetary revelations unscathed. The euro turned higher, as did the rest of the non-USD pack. Is the King Dollar as embattled as it seems at first sight? Let's take a step back from the daily turmoil and see the bigger picture for what it is.
In our opinion, the following forex trading positions are justified - summary:
EUR/USD
Yesterday's Fed dovish turn put a floor below the euro and higher rates followed. Earlier today, we saw follow-through buying, and the pair broke above the declining blue resistance line.
While this is a bullish development, we have already seen something similar earlier this month - and the pair went on to give up its gains eventually. Higher values of the exchange rate will become more likely and reliable only once we see a breakout above the early June highs. Until then, a reversal lower shouldn't surprise us.
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
The proximity to the red gap encouraged the sellers to act - and they kept on pushing lower all this week. The sharp downswing brought the pair below the rising blue trend channel, breaking below recent lows earlier today.
The vigor of the bears' move suggests that we'll see a test of the lower border of the declining orange trend channel in the very near future. The daily indicators concur.
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
Similarly in USD/CHF, we witnessed a sharp reversal lower. While the bulls attempted to move higher yesterday, they were rebuffed at the red resistance zone. This way, the tiny intraday breakout attempt above the declining red resistance line has been invalidated.
Sharply lower rates followed, and there's no end in sight for them today either. A test of the early-June lows at the green support zone looks to be on the horizon shortly.
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
Summing up the Alert, yesterday's dovish Fed surprise led to sharply higher EUR/USD and GBP/USD values. The USD has weakened across the board and at the moment of writing these words, there're no opportunities worth acting upon in the currencies. As always, we'll keep you - our subscribers - informed.
On a side note, there would be no regular Alert tomorrow due to Your Strategist's travel schedule. We apologize for possible inconvenience and we'll be back on Monday.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
