Earlier today, the U.S. dollar declined sharply against its Canadian counterpart as a broadly weaker greenback and higher crude oil prices supported the Canadian currency. Where will the exchange rate head next?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Looking at the charts, we see that EUR/USD rebounded after yesterday’s drop to a fresh multi-month low and approached the orange resistance line based on the November and December highs. Although this is a positive event, as long as there is no successful comeback above the lower border of the red declining trend channel (marked on the daily chart) another attempt to move lower should not surprise us.
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/CAD
Looking at the above charts, we see that USD/CAD dropped under the upper border of the purple rising trend channel (marked on the weekly chart) and the upper line of the purple declining trend channel (seen on the daily chart), which triggered a sharp decline earlier today. Thanks to this drop, the exchange rate reached the green support zone created by the 50% Fibonaci retracement (based on the December upward move) and the id-December lows, which could trigger a rebound. Nevertheless, in our opinion, as long as there is no invalidation of a breakdown under both purple resistance lines, another attempt to move lower can’t be ruled out. Therefore, if USD/CAD drops under this support zone, the next downside target will be around 1.3217, where the lower border of the purple declining trend channel is.
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.
AUD/USD
Last Friday, we wrote the following:
(…) the pair reached the red resistance line based on the mid-Sep and Nov lows and the 23.6% Fibonacci retracement based on the mid-late Dec downward move. Although this is a positive signal, we continue to believe that as long as AUD/USD remains under these levels (there is no invalidation of a breakdown under the red line) another downswing and test of the May lows can’t be ruled out.
From today’s point of view, we see that the red resistance line triggered a pullback as we had expected. As a result, the pair tested the December low, which resulted in a rebound in the following days. Thanks to this action, AUD/USD climbed above the red resistance line (based on the mid-September and November lows) and the 23.6% Fibonacci retracement (based on the mid-late December downward move), which is a positive signal and suggests further improvement. Additionally, buy signals generated by the indicators remain in place, supporting currency bulls. How high could the exchange rate go? In our opinion, the initial upside target would be the yellow resistance zone and the 50% retracement (around 0.7309-07342).
Very short-term outlook: bullish
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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