Earlier today, USD/CAD extended gains and hit a fresh multi-month high. Will we see further improvement in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
From today’s point of view, we see that EUR/USD moved sharply lower and broke below the Dec 22 low, which means that what we wrote on Thursday is up-to-date also today:
(…) in our opinion, as long as there won’t be an invalidation of the breakdown under the green support zone marked on the weekly chart (created by the Apr and Nov 2015 lows) another bigger move to the upside is not likely to be seen and another attempt to move lower can’t be ruled out.
If we see a decline, downside targets from our previous alert would be in play:
(…) a verification of a breakdown under the previously-broken Nov and early-Dec lows (…) suggests further deterioration to the 112.8%, 127.2% Fibonacci extension (both marked on the weekly chart) or even a test of the lower border of the long-term brown declining trend channel and the barrier of 1.0000 seen on the long-term chart below.
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
Looking at the daily chart, we see that USD/CAD moved higher and broke not only above the upper line of the purple trend channel, but also above the blue resistance line in the previous week. This improvement encouraged currency bulls to act, which resulted in a climb to a fresh multi-month high earlier today. Despite this move, the pair declined and invalidated earlier breakout in the following hours, which in combination with the current position of the indicators suggests further deterioration in the coming days. Nevertheless, such price action would be more likely if the exchange rate closes today’s session under the mid-Nov high and indicators generate sell signals. If we see such price action, the initial downside target would be the previously-broken upper border of the blue rising trend channel or even the upper line of the purple trend channel marked on the weekly chart below.
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
On Dec 20, we wrote the following:
(…) What’s next? Taking into account the fact that sell signals generated by the indicators remain in place, we may see a decline to around 0.7211, where the 61.8% Fibonacci retracement is (based on the Jan-Apr upward move and marked on the weekly chart) or even a test of the May lows (0.7143-0.7182) in the coming week.
On the daily charts, we see that the situation developed in line with the above scenario and AUD/USD extended losses, approaching the May lows. Although the pair rebounded and indicators generated buy signals earlier this week, we think that as long as AUD/USD remains under the red resistance line based on the mid-Sep and Nov lows, another downswing and test of the May lows can’t be ruled out.
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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