Earlier today, the USD Index moved higher on new hopes for a possible U.S. rate hike before the end of the year. As a result, the greenback moved higher against the Swiss franc, which resulted in a comeback above the medium-term support resistance line. But will currency bulls manage to hold gained levels in the coming days?
In our opinion the following forex trading positions are justified - summary:
- EUR/USD: none
- GBP/USD: short (a stop-loss at 1.3579; initial downside target at 1.2519)
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: none
EUR/USD
Looking at the daily chart, we see that although EUR/USD moved lower and slipped under the medium-term brown support line, currency bulls managed to push the pair higher, which resulted in an invalidation of earlier breakdown. Although this is a positive signal, we should keep in mind that the current position of the daily indicators suggests that lower values of the exchange rate are just around the corner. However, in our opinion such price action will be more likely if EUR/USD closes the day under the brown line. Until this time another attempt to move higher can’t be ruled out.
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.
USD/CAD
The overall situation in the medium term hasn’t changed much as USD/CAD is still trading in the blue consolidation. Today, we’ll focus on the daily chart.
On Thursday, we wrote the following:
(…) although the upper border of the red medium-term support line triggered a rebound yesterday, the exchange rate slipped lower earlier today, hitting our target once again. Taking this fact into account and combining it with the proximity to the red line (which serves as the nearest support) and the Fibonacci retracements (slightly below current levels is a support area created by the 76.4% and 78.6% retracements), we think that reversal and higher values of USD/CAD are just around the corner (this scenario is also reinforced by the current position of the daily indicators, which are very close to generating buy signals). Therefore, in our opinion, closing short positions (we opened them when USD/CAD was trading around 1.2972) and taking profits off the table is justified from the risk/reward perspective.
Looking at the daily chart, we see that the situation developed in line with the above scenario and USD/CAD rebounded sharply, bouncing off the red support line (which means that closing short positions and taking profits off the table was a very good decision) on Friday. Earlier today, the pair extended gains, which in combination with buy signals generated by the indicators suggests further improvement in the coming days. If this is the case, and we’ll see such price action, the initial upside target would be around 1.2948, where the 38.2% Fibonacci retracement based on the entire recent downward move (between the Jul 27 and Aug 18) is. If it is broken, we’ll likely see a test of the late-Jul and early Aug lows (reinforced by the 50% retracement) in the following days.
Very short-term outlook: bullish
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.
USD/CHF
Quoting our Thursday’s alert:
(…) slightly below current levels is a green support zone (created by the 61.8% Fibonacci retracement based on the entire May-Nov 2015 upward move and the 76.4% and 78.6% retracement levels based on the May 2016 increases), which in combination with the current position of the daily indicators suggests reversal and rebound in the coming day(s). Therefore, closing another profitable positions (as a reminder, we opened short positions when USD/CHF was trading around 0.9756) is justified from the risk/reward perspective at the moment.
From today’s point of view, we see that currency bulls took their chance and USD/CHF bounced off the green support zone on Friday (as we had expected). Earlier today, the pair extended gains, which resulted in a comeback above the previously-broken medium-term blue line. Although this is a positive signal (invalidation of the breakdown), we think that it would be more reliable if we see a daily closure above this line. If we see such rice action, USD/CHF will likely extend gains once again and (at least) test the purple declining resistance line in the following days.
Finishing today’s alert, we would like to draw your attention to the long-term chart of USD/CHF.
From this perspective, we see that the exchange rate slipped to the long-term red declining support line once again. As you see, several times in the past, this key support line stopped currency bears, which suggests that we may see similar price action here and higher values of USD/CHF in the coming week(s) should not surprise us.
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, Gold & Silver Fund Manager
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