Earlier today, the USD Index moved lower and came back below the level of 96 as Friday’s disappointing job report continued to weigh on investors’ sentiment. Thanks to these circumstances, the Australian dollar increased against its U.S. counterpart and broke above the upper line of the consolidation. How high could the exchange rate go in the coming days?

In our opinion the following forex trading positions are justified - summary:

• EUR/USD: short (a stop-loss order at 1.1887; the downside target around 1.0938)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: none
• USD/CHF: none
• AUD/USD: none

EUR/USD

On Friday, we wrote:

(…) the blue support line triggered a sharp rebound, which took EUR/USD to the solid orange resistance zone (…). Although his is a positive signal, we think that as long as the exchange rate is trading below this area another attempt to move lower is very likely.

Looking at the above chart we see that currency bears pushed EUR/USD lower (as we had expected), which resulted in a verification of the breakdown under the green resistance line. Earlier today, the pair rebounded slightly, which in combination with the current position of the indicators suggests another test of the orange resistance zone later today. Nevertheless, even if we see such price action, our previous commentary will be up-to-date.

Did this increase change anything in the medium-term picture? Let’s check.

From this perspective, we see that the situation in the medium term remains unchanged as EUR/USD is still trading under the long-term red declining resistance line and the orange resistance zone, which is also reinforced by the bearish evening pattern. Therefore, in our opinion, as long as there is no successful breakout above this area, a sizable rally is not likely to be seen.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed with bearish bias
LT outlook: mixed

Trading position (short-term; our opinion): Short positions with a stop-loss order at 1.1887 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/JPY

Although USD/JPY declined on Friday, the lower border of the consolidation triggered a rebound and the pair came back to 120. Despite this move, the overall situation in the medium-term remains almost unchanged as the exchange rate is still trading in the consolidation under the blue resistance line.

Will the daily chart give us more clues about future moves? Let’s check.

Quoting our Friday’s commentary:

(…) currency bears pushed USD/JPY under the green support line, which is a negative signal that suggests a test of the Sep lows. If the green support zone withstood the selling pressure, we’ll see a rebound and an attempt to come back above the green line.

As you see on the daily chart, the situation developed in line with the above scenario and USD/JPY came back above the green line, invalidating earlier breakdown. Taking this fact into account and combining it with the current position of the indicators, we think that further improvement is just around the corner. If this is the case and the pair moves higher from here, the initial upside target would be around 120.67-120.92, where the brown resistance lines are.

Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; 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.

AUD/USD

The situation in the medium-term hasn’t changed much as AUD/USD it trading below the previously-broken green zone. Today, we’ll focus on the very short-term changes.

Quoting our last commentary on this currency pair:

(…) buy signals generated by the indicators remain in place, which could trigger another rebound in the coming week.

Earlier today, AUD/USD broke above the upper border of the grey consolidation, which is a positive signal that suggests further improvement – especially when we factor in the current position of the indicators. How high could the pair go in the coming days? In our opinion, the initial upside target would be around 0.7169, where the size of the upswing will correspond to the height of the formation.

Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; 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
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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