Although the euro surged against the U.S. dollar during early European session yesterday, EUR/USD reversed and declined sharply after the ECB's Mario Draghi comments. As a result, the exchange rate erased most of the recent upward move. Will we see a test of the recent lows in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
On Wednesday, we wrote the following:
(…) as long as buy signals generated by the indicators remain in place another attempt to move higher and a test of the upper border of the green zone (around 1.0850) or even the next retracement (50% around 1.0900) can’t be ruled out.
Looking at the daily chart, we see that currency bulls pushed EUR/USD higher as we had expected. Thanks to yesterday’s increase the exchange rate climbed above the upper border of the green zone, however, this improvement was very temporary and the pair reversed. As a result, currency bears took control and erased over 70% of earlier increases in the following hours. With this decline, the pair dropped under the red support line, which in combination with sell signals generated by the indicators suggests further deterioration and a test of the recent lows in the coming day(s).
Very short-term outlook: bearish
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/CAD
Quoting our Tuesday’s alert:
(…) Although the pair rebounded slightly earlier today, we think that as long as there won’t be a comeback above the lower line of the very short-term purple declining trend channel another attempt to move lower is likely. If this is the case, the next downside target for currency bears would be the purple, dashed support line based on the Sep and Oct lows (currently around 1.3207) or even the 50% Fibonacci retracement around 1.3174.
From today’s point of view, we see that the situation developed in line with the above scenario and USD/CAD reached our downside targets yesterday. What’s next? Taking into account the 50% Fibonacci retracement and the current position of the indicators it seems that reversal is just around the corner. Nevertheless, as long as there won’t be buy signals, which could encourage currency bulls to act, another attempt to move lower can’t be ruled out. Therefore, if the pair declines from here, we may see a drop to the green support zone marked on the daily chart (created by the late Sep lows, the 61.8% retracement and the lower purple rising support line) around 1.3078-1.3090. Additionally, this area is reinforced by the lower border of the purple rising trend channel seen on the weekly chart.
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.
USD/CHF
On the daily chart, we see that although USD/CHF extended losses and dropped under the 23.6% Fibonacci retracement, this deterioration was very temporary and the pair reversed, invalidating earlier breakdown. Additionally, the CCI and Stochastic Oscillator generated buy signals, which resulted in a climb above the upper border of the blue and grey rising trend channels. Thanks to yesterday’s price action, the exchange rate also increased to the upper border of the blue consolidation. Although this area could pause further rally (similarly to what we saw in the previous days), we think that all the above-mentioned positive factors will encouraged currency bulls to act and trigger a test of the last week’s high or even the orange resistance zone seen on the weekly chart in the coming days.
Very short-term outlook: mixed with bullish 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.
On an administrative note, due to my travel plans, there will be no regular Forex Trading Alerts since Monday to Thursday, but if the situation changes dramatically, we will send you a quick note with our latest analysis and thoughts on that matter.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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