The U.S. dollar reversed and approached the monthly low after disappointing consumer sentiment data. Earlier today, the Thomson Reuters/University of Michigan preliminary consumer sentiment index fell to 79.9 for March, from 81.6 in the previous month (well below expectations for a rise to 82.0). Additionally, the U.S. producer price index fell 0.1% in February (also below expectations for a 0.2% rise), while core producer price inflation (which excludes food, energy and trade) slipped 0.2% last month (also below expectations for a 0.1% rise). What impact did it have on major currency pairs? If you want to know our take on this question, we invite you to read our today's Forex Trading Alert.
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: short (stop-loss order: 1.4008)
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Quoting our last Forex Trading Alert:
(…) EUR/USD (…) reached its first upside target - the lower orange line. If this resistance (in combination with the 112.8% Fibonacci extension) encourages sellers to act, we may see a pullback to around yesterday’s low (in this area is also the 23.6% Fibonacci retracement based on the recent rally). This scenario is also reinforced by the current position of the indicators.
As you see on the above chart, we noticed such price action yesterday as EUR/USD dropped to the 23.6% Fibonacci retracement. This support level encouraged buyers to act, which resulted in a corrective upswing to around yesterday’s high. Despite this growth, the exchange rate still remains between yesterday’s high and low. Even if the exchange rate extends gains, it seems that the orange resistance line will stop (or at least pause) further improvement. At this point it’s worth noting that sell signals generated by the indicators remain in place, supporting sellers. Therefore, if the exchange rate drops below yesterday’s low, we may see further declines and the next downside target would be the 38.2% Fibonacci retracement.
Before we summarize this currency pair, let’s take a look at the 4-hour chart.
From this perspective, we see that EUR/USD remains in a consolidation. Although the pair rebounded earlier today, we see that it gave up the gains and declined below the red support line, reaching the upper line of the rising trend channel. If this support is broken, the next downside target for the sellers will be the 23.6% Fibonacci retracement once again. However, if the exchange rate drops below this support level, the price target (after a breakdown below the lower border of the consolidation) would be below the 38.2% Fibonacci retracement (we marked it with the light blue rectangle).
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: bearish
Trading position (short-term) in our opinion: Short. Stop-loss order: 1.4008. We will keep you informed should anything change as far as our opinion is concerned, or should we see a confirmation/invalidation of the above. The above is not an investment / trading advice and please note that trading (especially using leveraged instruments such as futures or on the forex market) involves risk.
GBP/USD
In our last Forex Trading Alert, we wrote the following:
(…) although GBP/USD rebounded sharply, the pair still remains below the declining line resistance lines (in terms of intraday highs and daily closing prices). If they holds, we may see a pullback to the nearest Fibonacci retracement in the near future. (…)The position of the indicators supports buyers at the moment.
Yesterday (and also earlier today), we saw such price action as GBP/USD declined to the 38.2% Fibonacci retracement. If this support level encourages buyers to act, we may see another corrective upswing in the coming day (or days). If it is broken, the next downside target will be the green support line based on the Feb.24 and yesterday’s lows. From this perspective, it seems that as long as the exchange rate remains between this line and both red resistance lines, a bigger upswing/downswing is not likely to be seen.
Very short-term outlook: mixed
Short-term outlook: mixed
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. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/JPY
Quoting our last Forex Trading Alert:
(…) the sellers successfully pushed the exchange rate below the very short-term support line, which suggests further deterioration – especially when we factor in sell signals generated by the indicators. In this case, we may see a drop even to around 101.38 (the March 4 low).
Earlier today, we saw such price action as USD/JPY reached the green support line. If it encourages buyers to act, we will likely see a corrective upswing in the coming day (or days). However, if it is broken, the next downside target will be the February low. When we take a closer look at the position of the indicators, we see that they still support sellers.
Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
USD/CAD
Although USD/CHF erased some losses, the pair still remains between yesterday’s high and low. So, what we wrote in our previous Forex Trading Alert is still valid.
(…) all indicators reversed and the CCI and Stochastic Oscillator generated sell signals, which suggests further deterioration. In this case, the first downside target will be the lower border of the rising trend channel (currently around 1.1009).
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: bullish
LT outlook: bearish
Trading position (short-term): In 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
Looking at the above chart, we see that the situation hasn’t changed much as USD/CHF remains between yesterday’s high and low. Therefore, what we wrote in our last Forex Trading Alert is still up-to-date.
(…) sellers (…) reached the support zone. If this area encourage buyers to act, we will likely see a corrective upswing in the coming day (or days). However, if it is broken, the next downside target will be around 0.8671, where the 161.8% Fibonacci projection is. The position of the indicators hasn’t changed much. Although there is a positive divergence between the CCI and the exchange rate, the Stochastic Oscillator is oversold and the RSI slipped to its lowest level since the beginning of the month.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish
Trading position (short-term): In our opinion, the space for further declines seems limited, so opening short positions at the moment is not a good idea. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
AUD/USD
Quoting our last Forex Trading Alert:
(…) AUD/USD (…) reached the green resistance line. If it holds, we will likely see a pullback to the upper line of the declining trend channel in the coming day (or days).
As you see on the above chart, the resistance line encouraged sellers to act, which triggered a pullback yesterday (and also earlier today) that took the pair below the 23.6% Fibonacci retracement once again. From this perspective, the situation is a bit unclear because the CCI and Stochastic Oscillator move in opposite directions. Nevertheless, if the pair extends losses, the next downside target will be the 38.2% Fibonacci retracement. As a reminder, the nearest resistance is still the green line.
Very short-term outlook: mixed
Short-term outlook: bullish
MT outlook: bearish
LT outlook: bearish
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment. 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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