Although the National Australia Bank said its business confidence index increased, the Australian dollar gave up yesterday’s gains and declined against its U.S. counterpart. As a result, AUD/USD erased most of Monday’s gains and re-approached important support zone. Will it manage to stop currency bears in the following days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the daily chart, we see that the situation in the very short term hasn’t changed much as EUR/USD is trading in the blue consolidation, therefore, what we wrote yesterday is up-to-date:
(…) currency bulls didn’t manage to push the exchange rate above Friday’s high, which resulted in another pullback. Additionally, sell signals generated by the indicators remain in play, which suggest further declines. If this is the case and the pair extends losses, we’ll see a re-test of the green support zone and the upper border of the red declining trend channel in the coming week.
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/JPY
On the weekly chart, we see that USD/JPY declined in the previous week, but the blue support zone managed to stop declines and trigger a rebound. In this week we see similar price action, which suggests that further improvement is likely – especially when we factor in buy signals generated by the indicators.
Are there any technical factors that could hinder the realization of the above scenario? Let’s examine the very short-term chart and find out.
From this perspective, we see that although USD/JPY rebounded in the previous week the yellow resistance zone triggered a decline, which erased most of that increase. Earlier today, the exchange rate moved higher once again, but in our opinion, as long as there won’t be breakout above the orange resistance zone, further improvement is questionable and another re-test of recent lows should not surprise us – especially if the Stochastic Oscillator generates a sell signal.
Very short-term outlook: mixed
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.
AUD/USD
A week ago, we wrote the following:
(…) we think that as long as there won’t be sell signals generated by the indicators another attempt to move higher is likely. If this is the case and AUD/USD breaks above the orange zone, the next upside target would be (…) the upper border of the navy blue rising wedge (…)
From today’s point of view, we see that although currency bulls approached the pair to the above-mentioned upside target, they didn’t manage to hold gained levels, which resulted in a pullback. As you see invalidation of the breakout above the orange resistance zone triggered a sharp decline, which took AUD/USD not only under the medium-term green support line, but also below the lower border of the navy blue rising wedge. Yesterday, the green support zone triggered a rebound, but despite this increase, the exchange rate didn’t even reach the lower navy blue line, which showed currency bulls’ weakness and resulted in another downswing earlier today. What’s next? Taking all the above into account, we think that the pair will re-test the green zone and the 50% Fibonacci retracement in the coming days. At this point it is worth noting that the Stochastic Oscillator is oversold and very close to generating a buy signal, which suggests that the space for declines may be limited and the above-mentioned downside target trigger a reversal in near future.
Very short-term outlook: mixed
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, Gold & Silver Fund Manager
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