Earlier today, the Australian dollar extended losses against its U.S. counterpart after disappointing data from China (the report showed that China’s exports dropped 10.0% in Sep, while imports declined by 1.9%). As a result, AUD/USD slipped to its lowest level since Sep 19, approaching important support zone. Will it manage to stop currency bears in the coming days?

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

• EUR/USD: none
• 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

On the daily chart, we see that EUR/USD broke below the red declining line based on the May and Jun highs and the support zone created by the 76.4% and 78.6% Fibonacci retracement levels (marked with a green circle on the daily chart), which means that what we wrote yesterday is up-to-date:

(…) the RSI slipped under the level of 30, while the CCI remains extremely oversold, which suggests that reversal in the coming days should not surprise us. Nevertheless, as long as the sell signal generated by the Stochastic Oscillator remains in play another downswing can’t be ruled out. Therefore, (…) we may see a decline even to the next grey support zone (created by the 88.6% Fibonacci retracement and late Jul lows) around 1.0954-1.0971.

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. Nevertheless, if we see an invalidation of the breakdown below the red declining line based on the May and Jun highs and the 76.4% and 78.6% Fibonacci retracement levels, we’ll consider opening long positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

USD/CAD

The sitation in the long-term perspective hasn’t changed much as USD/CAD remains near the upper border of the blue consolidation. Today, we’ll focus on the very short-term changes.

Looking at the daily chart, we see that currency bulls pushed USD/CAD higher in recent days. Despite this improvement, the orange resistance zone and the upper border of the brown rising wedge continue to keep gains in check, which means that as long as there won’t be a breakout above this important resistance area another move to the downside is very likely. Therefore, if USD/CAD moves lower from current levels, the initial downside target would be the lower border of the brown rising wedge. If this support is broken, the next downside target would be around 1.3027-1.3046, where the previous lows and the 50% Fibonacci retracement are.

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

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.3346 and initial downside target at 1.2876) 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:

(…) the medium-term green rising line, the long-term declining orange resistance line (both marked on the weekly chart) and the orange resistance zone (seen on the daily chart) coninue to keep gains in check. Additionally, sell signals generated by the indicators are still in play, which suggests that another attempt to move lower is just around the corner.

If the pair extends losses from current levels, we think that the initial downside target would be around 0.7516, where the 70.7% Fibonacci retracement (based on the Sep upward move) is.

From today’s point of view, we see that the situation developed in line with the above scenario and AUD/USD reached our initial downside target earlier today. Taking this fact into account and combining it with the current position of the indicators and the proximity to the green support zone, we think that closing short positions (as a reminder, we opened them when AUD/USD was trading around 0.7650) and taking profits off the table is a good investment decision.

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

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts