Although the British pound moved higher against the greenback earlier today, currency bulls didn’t manage to hold gained levels, which resulted in a pullback and invalidation of earlier breakout. What does it mean for the exchange rate?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
On Friday, we wrote:
(…) EUR/USD moved little higher earlier today. Additionally, buy signals generated by the indicators remain in place, suggesting another attempt to move higher. If this is the case and the exchange rate extends gains, the initial upside target would be around 1.0702, where the 23.6% Fibonacci retracement (based on the recent downward move) is.
Looking at the daily chart, we see that the exchange rate moved higher and broke above the last week high earlier today. Despite this improvement, currency bulls didn’t manage to push EUR/USD even to the first Fibonacci retracement, which resulted in a pullback in the following hours. Taking this fact into account, it seems that the exchange rate may re-test the last week low in very near future.
Nevertheless, buy signals generated by the CCI and Stochastic Oscillator remain in place, suggesting that another attempt to move higher is just around the corner. Additionally, the size of the downward move between the May high and the Oct 23 low is very similar to the decline between the Nov high and the last week low, which increases the probability of reversal in the coming week – especially when we factor in the fact that the green support zone (marked on the weekly chart below) continues to keep declines in check.
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
Quoting our previous commentary on this currency pair:
(…) the exchange rate verified earlier breakout above the lower purple line and bounced off the 61.8% Fibonacci retracement, which in combination with buy signals generated by the indicators favors currency bulls and another attempt to move higher (…) and a test of the previously-broken lower border of the red declining trend channel (marked on the weekly chart) in the coming days.
From today’s point of view, we see that GBP/USD increased earlier today as we had expected. Although the pair climbed above the upper line of the green consolidation, the proximity to the lower border of the red declining trend channel encouraged currency bears to act, which resulted in an invalidation of earlier breakout. This negative event triggered further deterioration, which in combination with a sell signal generated by the Stochastic Oscillator suggests another attempt to move lower and a test of the lower line of the green consolidation or even a drop to the purple support line in the coming days.
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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