Earlier today, the USD Index extended gains and climbed above the level of 101, pushing EUR/USD to the lowest level since Nov 2015. Will we see further deterioration in the coming week?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the medium-term chart, we see that EUR/USD reached the key green support zone based on the Mar, Apr and Nov 2015 lows, which could stop declines in the coming week – especially when we factor in the current position of the daily and weekly indicators.
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.
GBP/USD
The situation in the medium term hasn’t changed much as GBP/USD remains under the lower border of the declining trend channel. Today, we focus on the very short-term changes.
On Monday, we wrote the following:
(…) the exchange rate not only reached our upside targets, but also climbed to the previously-broken lower border of the red declining trend channel (marked on the weekly chart). Taking these facts into account and combining them with the current position of the daily indicators (the RSI reversed, the CCI generated a sell signal, while the Stochastic Oscillator is very close to doing the same), we think that lower values of GBP/USD are very likely in the coming days. Therefore, if the pair declines from here, the initial downside target would be the previously-broken upper border of the blue consolidation and the lower border of the purple declining trend channel (marked on the daily chart) around 1.2315-1.2365.
From today’s point of view, we see that the situation developed in line with the above scenario and the exchange rate reached our downside target earlier today. What’s next? Taking into account the proximity to the purple support line and the 61.8% Fibonacci retracement (based on the Oct-Nov upward move), it seems that currency bulls will push GBP/USD higher in the coming week. Nevertheless, as long as there are no buy signals generated by the indicators, another attempt to move lower (and a test of the 76.4% and 78.6% retracements) can’t be ruled out.
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bearish
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
On Wednesday, we wrote:
(…) invalidation of the breakout above the red declining resistance line triggered a sharp decline, which took AUD/USD below the green support line. Earlier this week, the pair verified the breakdown, which suggests further deterioration.
On the daily chart, we see that AUD/USD extended losses in line with the above scenario. With this week’s decline, the exchange rate dropped not only under the mid-Sep lows, but also below the 61.8% Fibonacci retracement (based on the May-Nov upward move), which suggests a test of the green support zone (created by the late Jun lows and the 70.7% retracement) in near future. Nevertheless, the current position of the daily indicators suggests that reversal in the coming week is likely (in our opinion, such price action will be more reliable if they generate buy signals).
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, Gold & Silver Fund Manager
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