Earlier today, official data showed that the number of unemployed people in German dropped by 6,000 in Jun, beating analysts’ forecast, which supported the euro and pushed EUR/USD to the previously-broken long-term line. Will it stop further improvement in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Yesterday, we wrote the following:
(…) what's next? (…) the CCI and Stochastic Oscillator almost generated buy signals, which suggests further improvement and a test of the late May lows or even the previously-broken brown line in the coming day(s).
Looking at the above charts, we see that the situation developed in tune with our yesterday’s assumptions and EUR/USD reached our upside target, which looks like a verification of earlier breakdown under the long-term brown line. If this is the case and the exchange rate declines from, it would be a negative signal, which may trigger another downswing in the following days (at this point, it is also worth noting that the recent upward move approached the pair to the upper border of the green rising trend channel, which serves as an additional resistance at the moment). However, in our opinion, as long as there won’t be a breakdown below the lower line of the green rising trend channel another bigger move to the downside is not likely to be seen.
Nevertheless, we should keep in mind what we wrote yesterday:
(…) on the other hand, we can treat the current upward move as a correction preceding the next downward move in the bearish flag formation. In this case, if EUR/USD closes one of the following sessions under the lower border of the green rising trend channel, we may see not only test of the recent low and the 61.8% Fibonacci retracement, but also decline even to around 1.0590, where the size of the move will correspond to the length of the first downward move.
Taking all the above into account, we believe that waiting at the sidelines for a confirmation or invalidation of the above is the best decision at the moment. However, if we receive more clear signals, we’ll consider opening positions.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mmixed
MT outlook: mixed
LT outlook: mixed
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
On Tuesday, we wrote the following:
(…) the yellow resistance zone (created by the previous highs) in combination with the position of the indictors encouraged currency bears to act, which resulted in a reversal earlier today. With this move, the exchange rate dropped under the red line based on the previous highs, invalidating earlier breakdown. Taking this negative signal (which would be even more bearish if the pair closes today’s session under the above-mentioned line) into account and combining it with sell signals generated by the indicators, we think that another downward move is just around the corner.
From today’s point of view, we see that currency bears pushed USD/CAD lower as we had expected. As a result, the exchange rate closed yesterday’s session under the red line based on the previous highs, invalidating earlier breakout above this line. This negative event and sell signals generated by the indicators encouraged currency bears to act earlier today, which suggests further deterioration.
How low could the exchange rate go in the coming days? We believe that the best answer to this question will be the quote from our previous alert:
If (…) USD/CAD extends declines from here, the initial downside target would be the blue support zone marked on the daily chart.
Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed
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
On the weekly chart, we see that the previously-broken long-term green resistance line stopped currency bulls, triggering a pullback. How did this move affect the very short-term picture? Let’s check.
Quoting our previous commentary on this currency pair:
(…) USD/CHF climbed to the orange resistance zone and the green resistance line once again. However, this time, the position of daily indicators (the CCI and Stochastic Oscillator are overbought and very close to generating sell signals) suggests that the space for gains may be limited and reversal is just around the corner.
Looking at the daily chart, we see that the situation developed in line with the above scenario and USD/CHF moved lower earlier today. Additionally, the CCI and Stochastic Oscillator generated sell signals, supporting further deterioration in the coming days. Nevertheless, in our opinion, this scenario will be even more likely if the exchange rate closes today’s session under the orange zone. If we see such price action, and USD/CHF declines from current levels, the initial downside target would be around 0.9637, where the red declining support line currently is.
Very short-term outlook: mixed with bearish 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. 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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