Earlier today, the British pound moved higher against the U.S. dollar after official data showed that the Markit services PMI increased to 56.2 in December, beating analysts’ forecasts. As a result, GBP/USD re-tested the first resistance zone, but will we see further improvement in the coming days?
In our opinion the following forex trading positions are justified - summary:
EUR/USD
Yesterday, EUR/USD broke above the orange resistance line based on the November and December highs. Earlier today, this positive event triggered further improvement, which resulted in a sharp increase and approached the exchange rate to the lower border of the red declining trend channel (marked on the daily chart). Despite this price action, the red resistance line stopped currency bulls once again and EUR/USD pulled back in the following hours. What’s next? On one hand, the pair is still trading above the orange declining line, which suggests that we may see a verification of a breakout later in the day. However, on the other hand, as long as there is no successful comeback above the lower border of the red declining trend channel another attempt to move lower and a test of recent 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.
GBP/USD
Earlier today, GBP/USD extended yesterday’s gains and re-tested the strength of the previously-broken green zone. As it turned out, this area withstood the buying pressure and triggered a pullback once again, which suggests anther decline in the coming days. If we see such price action, the initial downside target for currency bears will be around 1.2127, where the purple support line currently is. Nevertheless, a breakdown below the lower border of the blue rising trend channel suggests a drop to around 1.2090, where the size of the move would correspond to the height of the channel. In this area is also the October low and the barrier of 1.2000, which together could stop further deterioration once again.
Very short-term outlook: mixed with bearish bias
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.
USD/CHF
Looking at the daily chart, we see that although USD/CHF broke below the upper borders of the grey and blue rising trend channels in the previous week, the first green support zone created by the late November and early December lows stopped further declines and triggered a reversal. In this way, the exchange rate rebounded sharply and invalidated the earlier breakdown, which resulted in a comeback to the December highs and the orange resistance zone marked on the weekly chart. As you see, this area was strong enough to trigger another pullback, which suggests that if USD/CHF closes today’s session below the grey line, we’ll likely see a re-test of the first support zone. Finishing today’s commentary on this currency pair, it is also worth noting that the CCI reversed and the Stochastic Oscillator generated a sell signal, which increases the probability of further deterioration and a realization of the mentioned scenario.
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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