Tuesday looks to be marching in lockstep with Monday’s action in the foreign exchange universe. That means not much happening at first sight. As they say, time to go long, time to go short, and time to go fishing? Not so fast! Even a relative breather provides a welcome opportunity to reexamine the case for a trade (or against it) and adjust the parameters accordingly. Been there, done that. Here we go.
In our opinion, the following forex trading positions are justified - summary:
- EUR/USD: long (a stop-loss order at 1.1099; the initial upside target at 1.1311 – details below)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
First, looking at the weekly chart and then on the daily one, we see that EUR/USD reversed during yesterday’s session. It finished the day below the lower border of the red declining trend channel and the long-term green support line as seen on the weekly chart.
This is a negative development but taking into account just how close March lows are and also the current position of the daily indicators (bullish divergences forming between both the CCI and the Stochastic Oscillator, and the exchange rate itself), we think that reversal is most likely around the corner.
Additionally, we have seen similar price action almost a month ago. It suggests that as long as there is no weekly close below the green support line on the weekly chart, another rebound and an invalidation of the small breakdown below it remains very likely.
Trading position (short-term; our opinion): Long positions with a stop-loss order at 1.1099 (in tune with yesterday’s volatility in this pair, we are moving it lower) and the initial upside target at 1.1311 are justified from the risk/reward perspective.
USD/CHF
The first thing that catches the eye on the above chart, is the breakout above the upper border of the blue consolidation. Thanks to this move, the exchange rate also closed the day above the 38.2% Fibonacci retracement, which strengthens the likelihood of further improvement in the coming days.
If the pair extends gains from here, the first upside target would be around 1.0026, where the size of the upward move would correspond to the height of the blue consolidation. The position of the daily indicators doesn’t say no to such a move.
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.
AUD/USD
The daily chart shows that AUD/USD invalidated the earlier breakout above the upper border of the red declining trend channel for the fifth time already during March, which is a bearish development. Remember, the more times a resistance (or support) is tested but not broken, the stronger it is and becomes.
It’s clearly visible that the bulls have serious problems overcoming this resistance, which means that the road to the north looks closed now absent a bullish turn of events.
What does it mean for the exchange rate going forward? In our opinion, short-lived moves in both directions while still remaining inside the blue consolidation. However, if the Stochastic Oscillator generates its sell signal, it will strengthen the case for seeing a retest of the green support zone in the coming days.
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.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
