The greenback moved lower against the euro after the release of U.S. home sales missed analysts' forecasts. The National Association of Realtors said that U.S. existing home sales declined 5.1% to 4.62 million units last month (while analysts had expected a 4.3% drop to 4.68 million units). What happened with other currency pairs? What is their current outlook? We invite you to read our today's Forex Trading Alert.
In our opinion the following forex trading positions are justified - summary:
EUR/USD
As you see on the above chart, the situation hasn’t changed much as EUR/USD remains in the rising trend channel (marked with orange). From this perspective, it seems that as long as there is no breakout above the upper line (or a breakdown below the lower border) a bigger upswing (or downswing) is not likely to be seen. Please note that the upper line of the rising trend channel is still reinforced by the medium-term support/resistance line (marked with brown on the weekly chart below). Additionally, the CCI and Stochastic Oscillator generated sell signals, which suggests that a pause or a correction is just around the corner.
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bearish
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment. However, if the exchange rate invalidates breakouts above the orange declining line and the upper line of the declining trend channel, we will likely consider opening short positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
GBP/USD
Looking at the above chart, we see that although GBP/USD closed the previous day below the lower border of the rising wedge, the pair rebounded earlier today. Despite this increase, the sellers managed to push the exchange rate below this major support line once again. With this downswing, the pair declined to the 38.2% Fibonacci retracement level based on the recent rally. From this perspective, if GBP/USD drops below this level, we will likely see further deterioration (especially if the exchange rate closes the day below the lower border of the rising wedge once again). If this is the case, the nearest support level will be the next Fibonacci retracement. We should also keep in mind that sell signals generated by the indicators remain in place, supporting sellers.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bullish bias
MT outlook: mixed
LT outlook: mixed
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment. Nevertheless, if the pair confirms the breakout below the lower border of the rising wedge, we will consider opening short positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/JPY
As you see on the above chart, the situation has improved as USD/JPY climbed above the upper line of a consolidation range (marked with yellow). With this upswing, the pair broke above the 38.2% Fibonacci retracement level (based on the recent decline) and reached a resistance zone created by the Jan.13 low and Jan.31 high. If this resistance is broken, we will likely see an upward move to the next Fibonacci retracement. However, if it encourages sellers to act, we may see a drop to yesterday’s low. Looking at the position of the indicators, we see that they are not overbought yet and support buyers. Please note that according to theory, a breakout above the upper line of the consolidation range may trigger an upswing to around 103.78, where the price target for the pattern is.
Very short-term outlook: mixed
Short-term outlook: mixed with bearish bias
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): In our opinion, the situation is too unclear to go short or long at the moment. So, 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
On the above chart, we see that USD/CAD extended gains, broke above a resistance zone created by the 76.4% and 78.6% Fibonacci retracement levels (based on the recent decline) and reached the upper line of the rising trend channel. In our last Forex Trading Alert, we wrote that the space for further growth could be limited by this important resistance line in the coming days. If this is the case, we may see a decline to the lower line of the rising trend channel in the coming week. However, we should keep in mind that although the indicators are overbought, they didn’t generate sell signals. Taking this fact into account, another attempt to break above this important resistance line can’t be ruled out.
Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): In our opinion opening long positions is not justified from the risk/reward perspective as the space for further growth seems limited at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CHF
As you see on the above chart, the situation hasn’t changed much as USD/CHF still remains between a support zone created by the 76.4%, 78.6% Fibonacci retracement levels (based on the Dec.-Jan. rally) and the 76.4%, 78.6% Fibonacci projections (marked with a green rectangle on the above chart) and the short-term declining support/resistance line (marked with blue). If the buyers manage to push the exchange rate higher once again and the pair closes the day above this major resistance line (invalidating the breakdown below this important line), we may see further improvement in the coming day (or days). At this point it’s worth noting that the indicators generated buy signals, which supports the bullish case. On the other hand, if this line encourage the sellers to act, we will likely see a re-test of the strength of the support zone.
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: bearish
LT outlook: bearish
Trading position (short-term): In our opinion, the situation is too unclear to go long as there is no an invalidation of the breakdown below the short-term declining support line. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
AUD/USD
Looking at the above chart, we see that the situation hasn’t changed much as AUD/USD remains between yesterday’s high and low. Therefore, what we wrote in our last Forex Trading Alert remains up-to-date.
(…) AUD/USD moved lower and broke below the next very short-term support line (marked with light blue). Although this is a bearish signal, the current correction is similar to the previous one, which means that the very short-term uptrend is not threatened at the moment. As you see on the daily chart, with today’s downswing, the exchange rate approached the Feb.13 low (which together with the Feb.10 low creates the nearest support zone). If this area encourages buyers to trigger an upswing, we may see a comeback to the orange very short-term support line. However, if this support zone is broken, we will likely see further deterioration and the initial downside target will be a very short-term rising support line (marked with dark green). Please note that this scenario is reinforced by the current position of the indicators, which suggests that a bigger pullback is just around the corner.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bullish bias
MT outlook: bearish
LT outlook: bearish
Trading position (short-term): In our opinion, if the pair drops below the February 10 low, we might consider opening short positions. However, as long as AUD/USD remains between this level and the 38.2% Fibonacci retracement level, 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
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