Weakening greenback pushed the Australian dollar to the major short-term resistance area once again. Time for reversal or further rally?

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

• EUR/USD: long (a stop-loss order at 1.1114; initial upside target at 1.1327)
• GBP/USD: none
• USD/JPY: none
• USD/CAD: short (a stop-loss order at 1.3346; initial downside target at 1.2876)
• USD/CHF: none
• AUD/USD: none

EUR/USD

Although EUR/USD rebounded, the situation in the medium-term hasn’t changed much as the exchange rate is still trading under the last week’s high. Nevertheless, the Stochastic Oscillator is very close to generating a buy signal, which could encourage currency bulls to act in the coming week.

Will we see such price action? Let’s examine the daily chart and find out whether it confirms the above scenario or not.

From today’s point of view, we see that although EUR/USD moved sharply higher yesterday, the pair gave up some gains. Despite this pullback, buy signals generated by the indicators remain in place, supporting currency bulls and further improvement. Therefore, what we wrote yesterday is up-to-date:

(…) the pair invalidated earlier small breakdown under the green support zone, which (…) triggered further improvement. Earlier today, the exchange rate extended gains and invalidated the breakdown under the lower border of the blue consolidation, which is an additional bullish signal. On top of that, the CCI and Stochastic Oscillator generated buy signals, which suggests higher values of EUR/USD in the coming days. If this is the case, the first upside target would be around 1.1284, where the upper border of the blue consolidation is. If this resistance is broken, we’ll see an increase to the orange declining resistance line based on the previous highs (currently around 1.1300) or even a rally to the brown medium-term resistance line in the coming days. Taking all the above into account, we think that opening long positions is justified from the risk/reward perspective.

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

Trading position (short-term; our opinion): Long positions (with a stop-loss order at 1.1114 and initial upside target at 1.1327) 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

From the weekly perspective, we see that the situation remains almost unchanged in recent weeks as USD/CHF is wavering between Sep high and low.

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

Quoting our previous commentary on this currency pair:

(…) in our opinion, further deterioration will be more likely and reliable if the exchange rate not only closes today’s session under the purple line, but also the CCI and Stochastic Oscillator generate sell signals, increasing the probability of declines. If we see such price action, USD/CHF may move not only to the last week’s lows, but even lower to around 0.9656, where the medium-term blue support line currently is.

Looking at the daily chart, we see that the situation developed in line with the above scenario and USD/CHF reached our downside target. Although, the blue support line triggered a rebound, sell signals are still in play, which suggests that another downswing and a re-test of the blue line is likely in the coming days.

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.

AUD/USD

Looking at the daily chart, we see that this week’s rebound took AUD/USD to the strong resistance area, where the medium-term green rising support line intersects the long-term declining orange resistance line. Taking this combination into account, we think that the probability of reversal is very high.

Will the very short-term chart confirm this scenario? Let’s check.

Quoting our Wednesday’s alert:

(…) What’s next? Taking into account buy signals generated by the indicators, we think that the exchange rate will extend gains in the coming days and test the previously-broken lower border of the purple rising wedge or even the orange resistance zone, which is currency intersected by the medium-term green line.

From today’s point of view, we see that the situation developed in tune with our assumptions and AUD/USD reached our upside target yesterday. What can we expect in the coming days? As you see on the above chart, many times in recent weeks the orange resistance zone was strong enough to stop further improvement – especially when the CCI and Stochastic Oscillator generated sell signals. Therefore, in our opinion, if the exchange rate drops under the purple support line and indicators generate sell signals, we’ll consider opening short positions. As always, we’ll keep you - our subscribers - informed should anything change.

Very short-term outlook: mixed with bearish bias
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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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